Luottolinja

Luottolinja is a revolving line of credit offered by banks and other financial institutions in Finland. It provides a pre-approved credit limit that can be drawn upon as needed, up to the agreed maximum. Unlike a traditional fixed-term loan, a luottolinja allows flexible access to funds for liquidity management by individuals or businesses, with repayment and interest tied to the amount drawn.

Key features include the predefined credit limit, the ability to draw, repay, and redraw funds multiple times during the facility period. Interest is charged only on the funds actually used, and rates may be fixed or variable. Fees can include an arrangement or annual facility fee, and some arrangements require collateral. The term of a luottolinja can be open-ended or set for a defined period with renewal options.

Luottolinja may be offered for consumers (personal lines of credit) or for businesses (working capital lines or overdraft alternatives). Personal lines are often unsecured, while business lines may be secured by assets such as inventory, receivables, or property, and are more likely to be subject to credit assessments and financial covenants.

Used to cover gaps in cash flow, seasonal expenses, or unexpected costs, luottolinja provides flexibility but at a cost that can be higher than some longer-term financing if fully utilized. Banks assess credit risk and comply with applicable Finnish and EU consumer protection and banking regulations, with terms disclosed before the agreement is signed.