7. What is a "line of credit"? A) A penalty for missed payments B) A pre-approved borrowing limit from which you can draw as needed C) A one-time loan with fixed payments D) A contract for leasing property
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A line of credit is like having a financial superhero in your back pocket! It's a flexible borrowing option that gives you a set limit of money you can tap into whenever you need it. Interest is only charged on the amount you actually use, making it a great way to manage unexpected expenses or fund ongoing projects without breaking the bank all at once. In the real world, lines of credit are often utilized by businesses for cash flow management, allowing them to cover day-to-day operating expenses even when revenue may be inconsistent. Individuals use them as a safety net for emergencies or to finance large purchases without the pressure of high-interest credit cards. So whether you're a business owner or just trying to juggle bills, a line of credit can be your financial ally!
