An elastic credit line typically refers to a type of open-ended, revolving credit line that a borrower can draw upon when needed. It’s named “elastic” because it provides flexibility in borrowing, similar to how an elastic band can stretch and contract. Here are some key points:
- Revolving: The borrower can use, repay, and use again up to the approved credit limit.
- Flexible: The amount of money that can be borrowed isn’t fixed. The borrower can choose how much to borrow within their approved limit at any given time.
- Interest: The borrower only pays interest on the amount of money they’ve actually borrowed, not on the total approved credit line.
- Creditworthiness: The size of the credit line usually depends on the borrower’s creditworthiness, including their credit score, income, and other factors.
- Fees: There might be annual or monthly fees associated with maintaining the line of credit, along with interest costs.
Common examples of elastic credit lines include credit cards and home equity lines of credit (HELOCs). These lines of credit can be useful for managing cash flow, making large purchases, or handling unexpected expenses.
However, as with any credit product, it’s important to understand the terms and conditions of an elastic credit line, including interest rates and fees, before deciding if it’s the right product for you.
This page was last updated on May 25, 2023.