Which financial arrangement allows a bank to lend money at a stated interest rate, charging a fee regardless of usage?

A line of credit is a financial arrangement that allows a borrower to access funds from a bank up to a predetermined limit while only charging interest on the amount drawn, rather than the entire credit limit. Importantly, many lines of credit come with an annual fee or a similar charge regardless of whether the borrower uses any of the available funds. This fee represents the cost of keeping the credit line open and available for future use, even if no money has been borrowed during a given period.

Lines of credit are distinct from loans, which typically require the borrower to take a lump sum and begin paying back that total amount including interest immediately. Mortgages are a specific type of loan secured against property, often with fixed repayment terms, and credit cards operate differently as well, allowing for revolving credit but generally carrying higher interest rates without the upfront fee characteristic of a line of credit.