What Is Revolving Credit?
First of all, revolving credit, or renewable credit, is a special type of credit that differs from a traditional consumer credit. It therefore constitutes a cash reserve.
How Does Revolving Credit Work?
However, it is part of a new kind of financial setup that differs from credit consolidation or traditional installment loans.
Firstly, the principle is simple: the lending organization provides you with a sum of money that you can use freely when needed. This credit functions as a reserve: from the given amount, you can draw the sum you wish without having to use the entire amount.
You only need to repay the amount of credit you have actually used. Suppose your credit provider offers you a revolving credit limit of 5000€. If you only need 1000€ for a specific expense, then you will only have to repay those 1000€. Interest will be incurred on these 1000€, but not on the remaining 4000€.
You can then borrow money again from all or part of the reserve.
If, however, you have too much ongoing revolving credit and/or personal loans and wish to alleviate your monthly repayment burden, you can opt for credit consolidation.
Frequently Asked Questions Below:
