Line of Credit (LOC) FAQs How can I use a LOC? You can use a LOC for various purposes, such as funding a business, consolidating debt, or paying for home renovations. Is the line of credit a loan? A line of credit is a flexible loan from banks or financial institutions that involves a defined amount of funds that you can easily access as needed and repay either immediately or over time. Does a line of credit affect credit score? A line of credit can help you build up your credit. Therefore, as long as you pay on time, a line of credit will improve your credit score and history. Is a LOC better than a traditional loan? A traditional loan is the best option if you need to finance one-time expenses. However, if you are looking to fund ongoing expenses or you want to reserve money in emergency situations, then a line of credit is a better option. What are the risks of a line of credit? Some of the risks of using a line of credit include overspending, higher interest rates on unsecured LOC, and the absence of regulatory protection. About the Author True Tamplin, BSc, CEPF® Facebook Linkedin Instagram Twitter Youtube True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists. True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics. To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.