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 North Carolina, 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 then 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 maximum amount and can draw funds up to that limit as needed. The borrower only pays interest on the amount they have drawn, not the entire credit line. This type of credit is revolving, meaning that as the debt is repaid, the borrower can draw more funds up to the limit, similar to how a credit card works. Lines of credit can be secured or unsecured and are often offered by local banks, with terms based on the borrower's personal or business relationship with the bank. North Carolina state statutes and federal laws regulate both loans and lines of credit, including interest rates, lending practices, and consumer protections. Borrowers should be aware of the specific terms and conditions associated with their credit agreement, as well as their rights under the Truth in Lending Act (TILA) and other relevant regulations.