Hey,
Most people fumble about what is revolving credit. You might be familiar with a type of revolving credit line, i.e. credit cards. As the name suggests, these loan funds have a credit line that keeps revolving within the set credit limit. Still confused? Take a look at the paragraph below for a simple explanation.
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What is a revolving loan fund?It is an open-ended credit account that is provided by the lender. The credit line can be used and repaid repeatedly. These accounts are open-ended, i.e. the account needs to remain open for its functioning. eg credit cards, personal lines of credit and home equity lines of credit.
Banks look at the present income, credit score, and employment type to give a revolving line of credit. The interest costs, bank charges, and loan processing charges are paid by the borrower.
How does the revolving loan work?The credit limit set by the lender is the maximum amount which can be availed as a loan.
When the borrower makes a purchase, the available credit line falls.
After each loan repayment, the available limit increases.
Suppose you have a total credit limit of Rs. 1 Lakh and you purchase a product worth Rs. 15,000 on this card. Now, you still have Rs. 85,000 to spend. Once your bill is generated for the given period, you will have to pay Rs. 15,000 in full. Once you pay Rs. 15,000, you will again have access to the full Rs. 1 Lakh limit on your card.
I hope my explanation of what is revolving credit has cleared your doubts.
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What is revolving credit?
reena
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2022-12-29T13:14:52+00:00 2022-12-29T13:14:53+00:00Comment
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