A line of credit is different from a loan in that a loan is a fixed sum of money repaid over a fixed term (period of time), and a line of credit is a revolving account a creditor can borrow against, withdrawing funds up to the maximum amount of the line of credit, and paying-down the line of credit at any time, with the balance fluctuating over time. Thus, a line of credit is more similar to a credit card account, but is usually provided by a local bank based on the debtor’s personal or business relationship with the bank.

In Missouri, as in other states, a line of credit and a loan are distinct financial products. A loan is a lump sum of money that is borrowed and meant to be repaid over a set period, with a fixed or variable interest rate, and a predetermined repayment schedule. In contrast, a line of credit is a flexible borrowing option where the borrower is approved for a certain amount of credit and can draw funds up to that credit limit as needed. The borrower can then repay the borrowed amount over time, often with the flexibility to pay only the interest for a period. The balance on a line of credit can go up or down depending on the borrower's withdrawals and payments, much like a credit card account. In Missouri, lines of credit are often provided by local banks and are based on personal or business relationships, as well as the borrower's creditworthiness. The specific terms and conditions of lines of credit, including interest rates, fees, and repayment terms, are governed by the agreement between the borrower and the financial institution, and must comply with both state and federal lending laws, including the Missouri Uniform Commercial Code and the Truth in Lending Act (TILA) at the federal level.