What is a revolving credit? A revolving credit is a certain amount of money that the lender allows you to use at any time. It is also called a flexible credit. The big advantage of a revolving credit is that you have money at your disposal for additional expenses, without having to take out a loan. How does it work? Need money? You can opt for a loan or an overdraft. You apply for a revolving credit from the bank or another lender. You determine in consultation the maximum amount of money that you can use for the revolving credit. For example 3000 or 5000. At a certain interest rate, you can access that amount as soon as you need it in whole or in part. So it doesn’t matter what you use the money for, it’s up to you. You pay it back as soon as possible by replenishing the credit. Once you have replenished the amount, you can borrow the credit again as often as you want. So you can only use 1000 and later another 4000 with a credit of 5000. You pay interest on the credit used, which is the profit for the bank in this case.
Revolving credit, yes or no?
A revolving credit offers some financial reserve. You always have money on hand for unexpected expenses. This can be a large reserve of €50,000 or more, or a small amount, up to €5,000, for example. Many people take out a revolving credit to keep a certain amount on hand in case it is necessary. We all have a few months when we are short on money or when we suddenly have to make an extra expense. Jobs in and around the house may also be necessary unexpectedly. A car may need to be replaced or you may still want to go on holiday, even though you were actually a bit short on cash. A revolving credit is suitable for all expenses. For when you need extra money that you do not immediately have in the bank. For example, for a renovation, if you do not yet know whether you will need extra money. With a revolving credit you can still access that money and then you can replenish that credit at your own pace. You can then use it again and pay it off again. If you are someone who handles debts carefully and also strives not to let debts get out of hand and to be repaid properly, then a revolving credit is very useful and recommended. For people who cannot handle money well and tend to build up debts, a revolving credit is not wise. After all, you also have to repay a loan again and again, because you pay interest on the overdraft.
Interest on revolving credit
You pay interest on the revolving credit. As soon as you use the credit, you are in principle in the red and you pay the then valid credit interest on that amount. You can repay money without penalty and you can top up the credit as soon as it suits you. You may also use the maximum amount whenever it suits you. It is often possible to only pay interest on your revolving credit. Before you take out a revolving credit, read the conditions and agreements carefully, so that you know exactly where you stand. The interest is variable because it is a revolving credit. You may use the credit again and again, as long as you do not exceed the limit. That is why the interest rate also varies. A revolving credit is ideal for anyone who sometimes needs some extra money.
Revolving credit, benefits
- You have access to an amount of money whenever you want
- The interest on your credit is often relatively low
- You only pay interest on the amount you actually withdraw
- You may top up the borrowed credit without penalty
- You can borrow the money again if necessary
Why a revolving credit?
A revolving credit is a continuous financial buffer for when necessary. You can use it without hassle, without consultation, and without complicated fixed agreements regarding repayment. It can be a large or relatively small amount, which you always have at your disposal. You use the money when you want and you pay it back when it suits you. You can then use it again.
- There is a credit limit, so you do not borrow a fixed amount of money
- You only pay interest on the amount of money you use
- Once you have replenished the amount, you may withdraw up to the credit limit again
- The interest is variable
- You may repay without penalty
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