Revolving credit refers to a type of credit arrangement that allows individuals or businesses to borrow money up to a predetermined limit, repay it, and then borrow again. Unlike a traditional loan, revolving credit provides a continuous line of credit that can be used and repaid repeatedly, as long as it stays within the established credit limit.
The credit limit is the maximum amount a borrower can access through the revolving credit arrangement. It is determined by the lender based on the borrower’s creditworthiness, financial situation, and other factors.
Borrowers are charged interest only on the outstanding balance that they carry from one billing cycle to the next. The interest rate can be variable or fixed, depending on the terms of the credit agreement.
Unlike traditional loans with a fixed repayment schedule, revolving credit does not have a set timeline for repayment. Borrowers have the flexibility to repay the outstanding balance at their own pace.
Revolving credit provides a high level of flexibility and convenience, as it allows borrowers to have access to funds when needed without the need to reapply for a new loan.