What is a line of credit (LOC)?

Quick answer: A line of credit is a way of borrowing money where you can borrow up to a certain limit, but you don’t have to borrow the whole amount. Products advertised as lines of credit are rare in the UK and can have very high interest rates.

A line of credit (LOC) is a flexible way to borrow cash up to a pre-agreed limit. You can withdraw funds when you need them and only pay interest on what you borrow. Once you’ve repaid some or all of your LOC, you can borrow from it again.

In the UK, some lenders are using the term ‘line of credit’ to advertise very costly offers — it’s worth finding a cheaper, less risky option if you can. Read our guide to learn how a UK line of credit works, how it can affect your credit score, and what other options you might have.

What is a line of credit and how does it work?

A line of credit (LOC) lets you borrow cash up to a pre-agreed credit limit. You can borrow as often as you like within that limit. With a personal line of credit, the money is paid into your bank account. An LOC is a type of ‘revolving credit’. This means that when you’ve paid off what you’ve borrowed, that credit becomes available again. Credit cards and overdrafts are other examples of revolving credit. Some lenders might advertise ‘credit line loans’, but these aren’t true loans. They’re still revolving credit, whereas real loans can only be used and repaid once.

You will pay interest on any money you withdraw from an LOC. But each lender has its own rules, so check them carefully. Some LOCs charge fees for each cash withdrawal, or insist you withdraw a minimum amount of money each time.

Products that are advertised as lines of credit are unusual in the UK. It’s worth looking at alternatives, as there may be other revolving credit options available to you with better rates.

How do I repay an LOC?

LOC payments are flexible, meaning you can repay the lender at your own pace. But you must make at least the minimum repayment each month. The lender will charge interest on anything left over, so try to clear your LOC balance as soon as you can.

What is a home equity line of credit (HELOC)?

A home equity line of credit (HELOC) lets you borrow against your home. This may help you borrow more, for longer and at a lower interest rate. But your home is at risk if you can’t keep up with repayments, so it’s important to think carefully before taking out a HELOC. Taking longer to pay your loan may also mean you pay more interest overall.

A HELOC is different from most equity loans because it’s revolving credit. This means that instead of borrowing a fixed lump sum, you can withdraw funds as needed up to a set limit.

You can also reuse your HELOC when you repay it — though only for a limited period, such as 5 years. After this ‘drawdown’ period, you’ll move into set monthly repayments (similar to a loan) if there’s still anything to repay.

Like other LOCs, HELOCs aren’t common in the UK and may come with very high interest rates. It’s worth looking for a cheaper secured loan or remortgage. Another way to get more flexible access to your home equity is through an offset mortgage, but you would need to already have some savings for this to work.

How is a line of credit different from other credit?

Here’s a simple comparison between lines of credit, credit cards, overdrafts and loans. Always check the terms when you apply for credit as each lender has their own rules.

	Line of Credit	Credit Card	Overdraft	Loan
Borrowing	Up to a limit. Minimum withdrawal amounts usually apply.	Up to a limit. No minimum spending amount.*	Up to a limit. No minimum spending amount.	Borrow a set amount, paid to you in one go.
Cash	Yes, through your bank account.	For a fee.	Yes, through your bank account.	Yes, through your bank account.
Monthly payment	Flexible, but must pay at least the minimum.	Flexible, but must pay at least the minimum.	Flexible, no minimum payment.	Fixed payment.
Early repayment fee	No	No	No	Yes
Revolving credit (can reuse)	Yes	Yes	Yes	No
Additional info	Very high interest rates in the UK.	Purchase protection included. May offer 0% periods or rewards.	Arrange with your bank before using to avoid fines & credit score harm.	Your home is at risk with a secured loan.

*Minimum withdrawal amounts may apply with a money transfer card.

Can I get a line of credit in the UK?

Lines of credit are more common in the USA than in the UK. But some UK lenders are advertising very costly lines of credit, with interest rates of around 50–90%. Like payday loans, they’re aimed at people with ‘bad’ credit scores who need cash quickly. It’s usually better to find a less risky option — we’ve explained some alternatives below.

How much will a line of credit cost?

It depends on things like your interest rate, how much you borrow and how long for. But they can have very high rates.

Here’s a simple example — let’s say you borrow £2,000 from a line of credit. The interest rate is 70% and the monthly minimum payment is £120. If you only paid the minimum and didn’t borrow more, it would take 2 years and 8 months to repay your LOC. And you’d pay £1,801 in interest overall, on top of paying back the £2,000 you borrowed. That doesn’t include if you dip into the LOC again, which would mean you’d keep paying interest.

Does a line of credit affect my credit score?

Yes. Your score dips when you apply, because the lender runs a hard credit check which appears on your credit report. It should go up again if you look after it. But your score will go down if you carry a high balance on your LOC, especially if you’re close to your credit limit.

If you dip into your LOC but pay it off before the next minimum payment is due, this is unlikely to affect your score. Making repayments on time and in full can help to build a good credit score over time — though it’s wise to do this with less risky credit, like a credit builder card.

Should I get a line of credit?

A LOC may help if you need to borrow cash quickly for the short-term — like covering an unexpected bill before payday. But UK lines of credit often have very high interest rates, meaning your debt can grow quickly. And because an LOC is revolving credit, it’s easy to keep dipping in and paying more interest. Try to find a cheaper and less risky option.

If you’re struggling with everyday costs, use MoneyHelper's benefits calculator to see if you can get free support. You can also get free, independent debt help and advice from charities such as National Debtline and StepChange .

Alternatives to a line of credit

Here are some other options that might suit you, depending on your credit history and whether you need cash. Only borrow what you can afford to repay. Remember, taking out credit will affect your credit score — but you can help protect it by making payments on time, paying balances quickly and staying within your credit limit.

If you need cash, consider…

Overdrafts

An arranged overdraft lets you borrow money using your current account. It lets you spend more money than is in your account (up to a pre-agreed limit). So if you have £0 in your account, and you spend £10, you’re £10 into your overdraft. Unlike LOCs, there’s no minimum payment or minimum withdrawal. You’ll pay interest on what you owe, unless you pay it before the due date. Overdraft interest rates are typically between 15–40%.

Money transfer cards

A money transfer card is similar to an LOC in some ways — it lets you pay cash into your bank account and reuse the credit you’ve paid back. Both have minimum payments and minimum withdrawals. One key difference is that a money transfer card comes with a 0% promotional period. Try to pay off the card before this period ends or it can get expensive. You usually need a good credit score to get approved. There may be transfer fees.

Personal loans

Personal loans let you borrow a lump sum, which is paid into your bank account. You then pay it back over an agreed period of time, plus interest. A loan may suit you if you want to spread a cost over a set period with fixed payments each month. There’s usually a fee for paying back the loan early. Small loans typically let you borrow between £500 and £3,000. Some of these are short-term loans for bad credit — but be wary of expensive payday loans.

If you have a poor credit score, consider…

Credit cards or loans for bad credit

Credit cards for bad credit are designed for people with low scores, so it may be easier to get approved. They tend to have low credit limits and high rates, as this can help the lender reduce the risk of you not paying them back. So try to pay the full amount off each month to avoid paying interest.

Bad credit loans are similar, with a few key differences. The payments aren’t flexible — instead, you pay a fixed amount each month until the loan’s paid back. There’s usually a fee if you want to repay it early. A loan isn’t revolving credit, meaning you get a single lump sum payment upfront, that can only be spent once.

Guarantor loans

With a guarantor loan, someone else (like a parent or partner) agrees to make the payments if you can’t. This reduces the risk for the lender and may help them approve you. Being a guarantor carries risk and often requires a good credit score.

Improving your credit score

Improving your score can give you more options, like credit with lower interest rates and higher borrowing amounts. Building a credit history takes time — but your score might get a quick lift if you register to vote or connect to Experian Boost.

It’s free to check your credit score. Your Experian Credit Score updates every 30 days if you log in, or every day with CreditExpert. Viewing your score won’t hurt it, so check as often as you like!

If you have a high credit score, consider…

Interest-free cards

An interest-free credit card can be a cheap way to borrow if you pay it off during the 0% period. When this period ends, you’ll be put on the lender’s standard variable rate which is often high. You may lose your 0% period early if you miss payments or go over your credit limit.

There are different types of 0% cards, including:

• Purchase cards — These offer 0% on purchases for a set period. They may charge a different rate for other transactions, like cash withdrawals.
• Balance transfer cards — These let you shift your existing credit card debt to another card, which charges less or 0% interest for a set period. There’s usually a transfer fee.
• Money transfer cards — You can pay cash from this card into your bank account. There’s usually a transfer fee.

Loans

A loan lets you borrow a lump sum and pay it back in regular instalments. Loans are often used to spread a large expense (like a car or home improvements) or for debt consolidation. The longer you have a loan, the more interest you’ll pay overall. There’s a fee for repaying your loan early.

There are two main types of loan:

• Secured loans — These are often used to borrow larger amounts and for longer periods. Your home is at risk if you can’t keep up secured loan repayments, so think carefully before taking one out.
• Personal loans — These offer smaller amounts and higher rates, but your home isn’t at risk if you can’t make the repayments.

You can search loans and credit cards with Experian. We compare over 60 lenders to guarantee great deals that are matched to you. Searching with us is completely free and won’t affect your credit score. Just remember we’re a broker, not a lender. This means we help you find credit but we don’t provide it.

Consumer Affairs Expert

What our expert says

Any revolving credit with a high interest rate is risky, so treat advertised ‘lines of credit’ with caution. Look for alternatives like a credit card or overdraft. Remember that improving your credit score even a little could give you access to better options. John Webb, Experian UK

Line of credit FAQs

What are lines of credit used for?

A line of credit is designed for flexible, short-term borrowing — like bridging a gap between an unexpected bill and your next payday. UK lines of credit often have very high interest rates, so they’re not suitable for long-term borrowing.

How quickly can I get money from my line of credit?

Some LOC providers say the money can arrive in your bank account within a few minutes. But it may take longer depending on your bank’s own processes for receiving the money. It’s worth checking with both your LOC provider and your bank.

What is a credit line loan?

Some UK lenders are using the term ‘credit line loan’ to advertise expensive lines of credit. Despite the name, they’re not true loans. They’re a type of revolving credit, which means you can borrow, repay and borrow again. A loan is a type of instalment credit — it offers a lump sum, has set monthly payments and ends when it’s cleared.

What does revolving credit line mean?

Revolving credit means you can borrow, repay and borrow again up to a pre-agreed limit. You pay interest on what you use, which can get expensive unless you pay off your balance regularly. Types of revolving credit include lines of credit, credit cards and overdrafts.

What are secured vs. unsecured lines of credit?

A secured line of credit — like a home equity line of credit (HELOC) — is tied to something you own, usually property. It may offer lower rates and larger amounts, but your home is at risk if you don’t make the repayments.

An unsecured line of credit isn’t tied to anything. This means less risk for you, but you may have to accept a smaller amount and higher interest rates.

What’s the difference between a line of credit and a loan?

Both loans and lines of credit let you borrow money that’s paid into your bank account. But LOCs are more flexible, while loans are more predictable:

• Borrowing — Loans give you a one-off lump sum, while LOCs let you borrow money, repay and borrow again (up to an agreed credit limit).
• Repaying — Loans have fixed monthly payments over a set period, and there’s a fee if you want to repay the loan early. But you can repay an LOC when you want, as long as you make the minimum monthly payment. Carrying a balance can quickly get expensive though.

What’s the difference between a line of credit and a credit card?

Credit cards and lines of credit are both revolving credit, meaning you can borrow again after paying it back. Both have flexible repayments and let you borrow up to a set limit. But there are some differences:

• LOCs offer access to cash. Credit cards usually charge a fee for cash withdrawals, whereas an LOC pays money directly into your bank account.
• Credit cards offer purchase protection. Purchases on your card costing between £100 and £30,000 are protected under Section 75. Your lender must help get your money back if something goes wrong, like a faulty purchase.
• Some credit cards have perks. Reward cards let you earn things like cashback, points or air miles. You usually need a good credit score to get one.

What’s the difference between a line of credit and an overdraft?

Both overdrafts and lines of credit:

• Let you access borrowed cash through your bank account.
• Allow borrowing up to a pre-agreed credit limit.
• Are revolving credit, meaning you can reuse the credit after you’ve repaid it.
• Have flexible repayments.

Their differences include:

• An overdraft is provided by your bank, whereas LOCs are typically offered by UK companies who specialise in lending to people with bad credit.
• Overdrafts don’t usually have minimum monthly payments.
• When you dip into your LOC, there’s often a minimum amount you must take.