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| *Loan,banking and credit>>>credit line |
How does a line of credit work? |
How does a line of credit work? Line of credits (LOCs) are generally available through a local bank. It is generally used for working capital requirements. An example of a working capital requirement would be when you have to pay for goods you have purchased but not yet received the money for goods you have sold. LOCs are generally unsecured (meaning no collateral) except for the guarantee of the borrower so banks consider them to be fairly risky unless you have other collateral you could offer as security. If you own a small business, basically your collateral could be the equity in your home. You get approved according to the risk factor that the bank thinks you to be. Then it works like a revolving account...the money is there & available to you & you only pay it back when you use it - because, of course, you have taken out of the account. When you pay it back, the money is, again, available to you. That's basically the way it works... Modified 1 year ago |
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