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What is revolving credit?

Revolving credit is a flexible, floating interest rate loan that is similar to an overdraft.

There are many different product names and different features within the revolving credit product set, but the following are a list of characteristics which are common to most revolving credit facilities.

These are the characteristics of revolving credit loans

  • Revolving credit is a transactional account.
  • The borrower may use or withdraw funds up to a pre-approved credit limit.
  • The amount of available credit decreases and increases as funds are borrowed and then repaid.
  • The credit may be used repeatedly.
  • The borrower makes payments based only their loan limit and pays interest only on the amount they've actually used or withdrawn.
  • The borrower may repay the loan over time (subject to any minimum payment requirement), or in full at any time.
  • Some revolving credit loans charge fees, and some do not.  
  • Some revolving credit products have reducing limits which amortise (reduce) like a table loan.

 

Read about how to manage revolving credit effectively