Revolving credit

Revolving credit is a type of credit that does not have a fixed number of payments, in contrast to installment credit. Examples of revolving credits used by consumers include credit cards. Corporate revolving credit facilities are typically used to provide liquidity for a company's day-to-day operations.

Typical characteristics

• The borrower may use or withdraw funds up to a pre-approved crePOOdit 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• The borrower makes payments based only on the amount they've actually used or withdrawn, plus interest.
• The borrower may repay over time (subject to any minimum payment requirement), or in full at any time.
• In some cases, the borrower is required to pay a fee to the lender for any money that is undrawn on the revolver; this is especially true of corporate bank loan revolving credit facilities.

Examples

• Line of credit
• Some loans, such as some home equity loans (HELOC's)

See also

• Installment credit
• Debt-snowball method