Introduction: Revolving credit is a type of loan or line of credit that allows customers the flexibility to access money up to a preset amount, known as the credit limit. As the customer pays down the balance, they are allowed to borrow those funds again and again, accumulating a lower interest rate than a typical loan and paying interest charges only on the current balance. Depending on the type of account, revolving credit can be secured or unsecured.

How it works: When a customer takes out a revolving line of credit, they are given a set credit limit. The customer can then withdraw money up to the limit, interest payments for the current month will begin to accrue. As the customer pays down the open balance, that money is once again available for use, minus interest rates, charges and any fees. When the credit limit is reached, the customer will be required to pay down the balance or risk incurring over limit fees. As the customer makes payments on the revolving line of credit, the credit limit may be increased based on good payment history.

Types of revolving credit: Revolving lines of credit can be secured or unsecured depending on the type of account. Secured lines of credit require some type of collateral, such as a personal item or physical property, which will be held as security in case of a default in payments. Unsecured lines of credit are available without the need for collateral, but is typically accompanied with higher interest rates.

Benefits of Revolving Credit: Revolving credit provides many benefits to its customers including flexibility, no pre-payment penalties, and lower interest rates than personal loans. Customers are allowed to access funds quickly and easily, allowing them to cover expenses instantly and saving them money on interest payments. In addition, the loan agreement is typically open-ended and there are no pre-payment penalties which give the customer the freedom to make extra payments or pay down the balance at any time without additional costs.

Conclusion: Revolving lines of credit give customers the flexibility to access funds quickly and easily, while also providing lower interest payments than a typical loan. Customers can pay down the open balance on the revolving credit and immediately have that money available again while only having to pay interest on the current balance. Revolving credit can either be secured or unsecured, depending on the type of account. Either way, it provides customers with great advantages, allowing them to cover expenses easily, and save money in the process.