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All you need to know about Revolving Loans

Loans • by Creditgenie • 08 June 2018

Everything you need to know about Revolving Loans

If you are in need of a rolling credit facility that gives you easy access to money 24/7, without having to reapply for a loan for every unexpected expense, then a revolving loan is something to consider.

 What is a Revolving loan?

 A revolving loan is best described as a loan that has a fixed monthly repayment. The interest rate that you would be paying will depend on what your existing credit score is, as well as your affordability.

 What is unique about a Revolving Loan facility?

A unique feature of a revolving loan is that it provides a rolling credit facility, allowing you to borrow again, up to your original loan amount, once a certain % of the loan has been repaid.

 How does it work?

A revolving loan facility works similar to a credit card. Unlike traditional loans, you don’t have to use the entire amount offered to you at once. You can use the funds as you need them, up to the credit amount offered. You pay a fixed monthly repayment and your credit limit is automatically restored once you have the paid back a stipulated % of the original loan amount (usually between 15% - 25%).

 In contrast to other lines of installment-based credit, a revolving credit loan does not have a fixed number of installments and you can repay more into the loan at any time.

 Benefits of a Revolving Loan

 You have consistent access to funds, again and again, making it useful facility to help manage your budget and cash flow by paying cash for purchases, over an extended time.

  • Once you have reached the minimum % to be paid back, you can simply transfer funds from your revolving loan account into your transactional account giving you immediate access to funds, 24/7.
  • You have the option to repay the credit facility faster and save on interest, giving you flexibility and control over how much you owe.
  • You can reduce the need for multiple store cards by using your revolving loan as a single credit facility to pay for all the purchases that you want to pay back over time.
  • The revolving loan facility offers optional debt protection ensuring that your debt is settled in full in the event of your death, permanent disability, unemployment or inability to earn an income or temporary disability.
  • A key benefit of having a fixed monthly repayment amount is that your monthly repayments never change even when using more of your facility or when the interest rate changes, making budgeting easier.
  • A revolving credit facility helps to provide liquidity for a company's day-to-day operations. And can an effective cash flow management tool for small businesses, in particular.

 How credit score affects your application for a Revolving Loan

Remember that whenever you apply for credit, the potential lender will always take a strong interest in your credit history and credit score. The interest rate that you would be paying on your revolving loan facility will depend directly on your existing credit score. 

 The information in your credit report covers different aspects of your credit behavior, so it's important to undertake a credit check regularly to identify and correct anything that may lead to a loan rejection.  Obtaining a regular credit report will allow you to check for errors and is one of the best ways to make yourself a more financially attractive customer, allowing you to apply for your revolving loan facility with confidence!