Do you temporarily need some extra money for a renovation, for example, but you do not know exactly how much the renovation will cost? Then a revolving credit can be a suitable form of loan. A revolving credit is a flexible loan. The repaid amount can be borrowed again up to the pre-agreed credit limit. In addition, the duration and interest of a revolving credit are variable.
How does a revolving credit work?
When you take out a revolving credit, you are faced with a credit limit. This is the maximum loan that you can get from the lender. You do not have to withdraw the amount in one go, but you can.
The big advantage (and the danger) of a revolving credit lies in its flexibility. You can always withdraw money up to the agreed loan amount. Have you repaid a portion, and still need some extra money? Then you can withdraw money again up to the agreed amount.
Continuous credit explanation costs
With a revolving credit you pay a fixed monthly amount in interest and repayment. As a rule, the repayment is approximately 2 percent of the agreed credit limit or the outstanding balance. The interest rate is variable. During the loan, the percentage can therefore both rise and fall. When the loan interest rate rises, you pay less. In general: the higher the credit limit, the lower the interest rate. Finally, the term of a revolving credit is variable. As soon as you have repaid the loan and think you no longer need any extra money, you can stop the loan.
What is revolving credit? – Advantages and disadvantages
Each credit form is suitable for one or more specific purposes. This includes the revolving credit. Because this form of credit is specifically intended to offer extra financial room for a longer period, it is therefore not suitable for everyone. Below is a summary of the advantages and disadvantages of the revolving credit.
Benefits of revolving credit
- A revolving credit is flexible, you can withdraw money and pay off whenever you want
- No additional repayment of running credit will incur a penalty
- You only pay interest on the outstanding amount
- In general, the amount, the monthly costs of revolving credit, remains the same
Cons of revolving credit
- The interest rate for revolving credit is not fixed and can therefore rise or fall during the term
- You simply spend money that is not yours
Tip! Do you want to borrow money for a large purchase and do you already know exactly how much money you need for that? Then a personal loan is a better fitting form of loan than a revolving credit. Moreover, this does not tempt you to borrow more than you need.
Withdraw and cash off whenever you want? A revolving credit is the most flexible form of borrowing money. Interested? Quickly compare the largest selection of loan providers. Close online and save immediately.