17 - Banking -- Lines of Credit and Overdrafts
Banking -- Lines of Credit and Overdrafts
1 -- Line of credit
It is effectively a bank account that can readily be tapped at the borrower's discretion. Interest is paid only on money actually withdrawn. Lines of credit can be secured by collateral or unsecured. A line of credit may take several forms, such as overdraft protection, demand loan, and term loan.
2 -- Overdraft
An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero.
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