Revolving Credit

Reviewed by Sweta | Updated on Aug 27, 2020

Introduction

Revolving credit is a credit facility made available to a customer to borrow and use funds as and when required. In this type of loan facility, the credit limit replenishes as and when the borrower makes the repayment.

What is a Revolving Credit?

Revolving credit lines are often given to facilitate business needs; however, individuals can also make use of the facility. The lender offers the borrower with access to money so that the borrower can use it as and when required. The customer may use the funds based on the current month's requirements. Credit cards are the best example of revolving credit.

Why Revolving Credit is Important?

  • Revolving credit involves interest costs, bank charges, and loan processing charges.

  • Banks and financial institutions consider present income, credit score, and employment type before giving a revolving line of credit.

  • In the case of a corporation, the finances and cash flow statements are checked before granting a line of credit.

  • Revolving credit does not actually consider the repayment of the loan. It involves the payment of interest on the credit used.