Line of credit is an agreement or arrangement between the bank and a borrower, to provide a certain amount of loans on borrower's demand. The borrower can withdraw the amount at any moment of time and pay the interest only on the amount withdrawn. For example, if you have $5000 line of credit, you can withdraw the full amount or any amount less than $5000 (say $2000) and only pay the interest for the amount withdrawn (in this case $2000).