A ________ type of loan is similar to a line of credit.However,even though only a portion of the loan is available to the borrower,interest is paid on the entire face value of the loan.

Question

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A compensating balance loan is similar to a line of credit, as only a portion of the loan is available to the borrower. However, interest is paid on the entire face value of the loan, which is the amount of money borrowed plus any fees or charges. This "compensating balance" serves as collateral for the loan and must be maintained by the borrower for the duration of the loan.

A ________ Type of Loan Is Similar to a Line