CREDIT LIMIT Meaning and
Definition
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A credit limit refers to the maximum amount of credit or borrowing capacity that an individual or a company is allowed to utilize from a financial institution or lender. It sets a cap on the total amount of money that can be borrowed or charged to a credit card by the borrower, ensuring responsible and manageable borrowing practices.
The credit limit is determined by several factors, including the borrower's creditworthiness, income, financial history, and the lending institution's policies. When granted a credit limit, the borrower is typically able to access additional funds up to that specified limit, either in the form of a loan or through a credit card.
The credit limit plays a crucial role in maintaining a healthy financial relationship between the borrower and the lender. It helps prevent excessive borrowing and encourages responsible spending to avoid overwhelming debt. By setting a maximum threshold, the lender can assess the borrower's ability to repay the borrowed funds based on their past financial track record, income, and other relevant factors.
Managing a credit limit effectively is essential in maintaining a good credit score. Consistently staying within the credit limit and making timely repayments can positively impact creditworthiness and open doors to more favorable borrowing terms in the future. On the other hand, exceeding the credit limit or consistently utilizing a high percentage of it may adversely affect credit scores and financial credibility, making it harder to secure credit in the future.
Common Misspellings for CREDIT LIMIT
- xredit limit
- vredit limit
- fredit limit
- dredit limit
- ceedit limit
- cdedit limit
- cfedit limit
- ctedit limit
- c5edit limit
- c4edit limit
- crwdit limit
- crsdit limit
- crddit limit
- crrdit limit
- cr4dit limit
- cr3dit limit
- cresit limit
- crexit limit
- crecit limit
- crefit limit
Etymology of CREDIT LIMIT
The word "credit" has its roots in the Latin word "creditum", which means "loan" or "entrusted thing". It is derived from the Latin verb "credere", which means "to believe" or "to trust". This ultimately comes from the Proto-Indo-European root "kerd", meaning "heart" or "to set one's heart upon".
The word "limit" has its origins in the Latin word "limitis", which means "border" or "boundary". It is derived from the Latin verb "limire", meaning "to mark the boundaries" or "to limit". It can be traced back to the Proto-Indo-European root "lei", meaning "to separate" or "to divide".
When combined, "credit limit" refers to the predetermined boundary or maximum amount of credit that a person is authorized to borrow or spend from a financial institution.
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