What Is a Key Difference Between a Line of Credit

question 164

Multiple Choice

What is a key difference between a line of credit and a revolving credit agreement?

• A)With a line of credit, the borrower must secure the funds by pledging collateral, but with a revolving credit agreement, no collateral is required; the bank simply agrees to continue making additional funds available as long as the borrower makes required payments of principal and interest.
• B)With a line of credit, the funds are available for up to a year, while under a revolving credit agreement, the funds are available for no more than 90 days.
• C)With a line of credit, the bank only agrees to make funds available as long as the borrower's credit rating doesn't deteriorate, while in a revolving credit agreement, the bank guarantees that the funds will be available.
• D)With a line of credit, the interest rate on the borrowed funds is stated in advance, while in a revolving credit agreement, the interest rate is allowed to "float" based on agreed-upon criteria.

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Definitions:

Tenant In Common

A form of co-ownership where each party owns a specific fraction of property, but there is no division of the property itself. Each tenant's share can be passed on to heirs.

Automatically Transfer

The process by which rights, property, or obligations are transferred from one party to another without the need for manual intervention or additional agreement.

Tract

A large area of land.

Minerals Below

Refers to subsurface rights pertaining to minerals like oil, gas, coal, and others that lie beneath the surface of a piece of land.