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 New York, 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 with interest over a predetermined period. Once the loan is paid off, the borrower would need to apply for a new loan to access additional funds. 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 can then repay the borrowed amount over time, often with the flexibility to borrow again without reapplying, as long as the credit limit is not exceeded. This makes a line of credit similar to a credit card, where the available credit replenishes as payments are made. In New York, lines of credit are commonly offered by banks and financial institutions, and the terms are based on the borrower's creditworthiness and relationship with the bank. Both personal and business lines of credit are subject to New York's banking regulations and federal laws, including the Truth in Lending Act (TILA), which requires lenders to disclose terms and costs of credit to consumers.