A line of credit is a loan facility agreement between a lender and a borrower. A total amount is agreed for the credit line.It is extended to creditworthy customers by banks and money lenders.Lines of credit form an integral function in assisting businesses in completing purchasing operations.Advantages to using a line of credit over a loan1. A line of credit allows the borrower to draw down as many times as they need to, up to the maximum amount permitted.2. Unlike a loan, interest on a line of credit is only charged on the actual credit that is used. Any available credit not used up does not incur any interest payment.A line of credit is often used in conjunction with a letter of credit obtained from the same money lender when making international transactions.