Revolving credit is a type of credit granted by a bank that is linked to a savings or checking account and depends on our income.
It is characterized by the fact that the available space is renewed as payments are made, and the interest charged is calculated only on the sums transferred to our accounts.
A natural person may apply for this type of credit and freely use it as required, but a legal person can only apply for it to be used as working capital.
So let’s see a little more in depth what a revolving credit is.
Characteristics of revolving appropriations
The main characteristics of renewable credits are as follows:
- Availability 365 days a year.
- The total amount of the credit is not fully deposited, but the client decides at what point in time he or she requires the money, and how much is the amount he or she wishes to dispose of at a certain point in time.
- The customer has the possibility of making the corresponding monthly payment and, in addition, voluntary subscriptions.
- Payments are made automatically at a pre-established time, depending on the entity.
The benefits of revolving credits
- You are not required to go to the bank to pay the monthly fees since they are linked to our checking or savings account and are debited directly from the account.
- Availability of the credit immediately by means of an electronic and telephone request from the bank so that the requested amount can be deposited in our accounts.
- Extension of the credit quota; if the client keeps managing the credit properly, it will allow him to count on this possibility always.
- Elimination of interest receivable if prepayments or extra payments are made.
- Provision of life insurance in the event of death or incapacity to pay credit.
- Financing in installments that affect the low fees.
- Freedom to invest the money in whatever the client has available.
- Financing of sums ranging from approximately $175 to $50,000 depending on the minimum and maximum amounts granted by each bank.
Suggestions for managing revolving credit
Revolving credit aims to solve temporary liquidity problems, so it is advisable to pay off the loans as soon as possible to always have the possibility of applying for a new loan.
Failure to pay installments may result in suspension or limitation of the credit granted to us.
It is then advisable to ask the bank for advice on the settlement of fees and interest that we will have to pay at the end of the credit as well as the costs of handling, taxes and any other amount for the use of your credit.
It is also highly recommended to make extra payments in addition to paying the installments so that you can get rid of the credit more quickly, and generate what in this medium is called a culture of good consumer, which will build a reliable image of your person before the bank.
Other forecasts you should always keep in mind are:
- Do not open your accounts in places where third parties can have access to your banking information, and avoid accessing the bank’s pages from links that are sent to your email account.
- Always use the bank’s website to make inquiries and check the status of your credit and the services offered by the bank.
We hope that with the information we have provided in this article, you will know clearly what a revolving credit is, what it has, and what are the most important points to consider when applying for it.