What is a key characteristic of a Line of Credit?

A Line of Credit is designed to provide flexible access to funds, allowing borrowers to withdraw money as needed, rather than receiving a lump sum upfront. This characteristic is particularly advantageous for businesses or individuals who may not require the full amount immediately but might need to draw funds intermittently to manage cash flow or cover unexpected expenses.

The flexibility of a Line of Credit means that interest is typically only paid on the amount borrowed, rather than on the total credit limit available. This offers significant financial agility, enabling borrowers to adapt their usage according to their current needs without being tied to a fixed payment schedule or restriction on how the funds can be used.

The other options, while they may describe some financial products, do not capture the essence of a Line of Credit. For instance, a fixed payment schedule is more aligned with loans that require regular, predetermined payments. Lines of Credit can be offered to both individuals and businesses, not exclusively to businesses. Additionally, while some lines of credit do require collateral, many options, such as unsecured lines of credit, may not have such a requirement, further underscoring the primary trait of flexibility.