 TITLE: What is a Line of Credit? CONTENT: How Does a Line of Credit Work?\n-------------------------------\nA personal credit line is a form of revolving credit that operates much like a credit card: You can write checks or make card payments in any amount up to your borrowing limit, and make payments in variable amounts as long as you meet a monthly minimum requirement. You pay interest only on the funds you borrow, and as you pay down your balance, your available credit is replenished.\nInterest rates on personal LOCs can be significantly lower than those on credit cards. And since you only incur interest if you use the credit line, setting one up can be a good strategy for dealing with unplanned expenses that exceed your emergency savings or other resources.\nPersonal lines of credit have fixed durations, which encompass two distinct phases, each typically lasting three to five years:\n*   **Draw period:** During the initial draw period, you can freely borrow and repay money against your credit line.\n*   **Repayment period:** During the subsequent repayment period, you can no longer borrow against the credit line, and must repay the outstanding balance in a series of fixed monthly payments.\nThe lengths of the draw and repayment periods are spelled out in the terms of the letter of credit loan agreement. END