A revolving loan is a relatively young product of the financial sector. Banks and loan companies provide this type of services. The advantage of the solution is the fact that the customer has constant access to money. In the case of non-banking institutions, the limit may reach USD 5,000.
Revolving loan – what is it?
A revolving loan is one of the products of the financial sector. Banks and loan companies provide this type of services. As part of a special account, the borrower has a sum of money at his disposal. The loan amount depends on the client’s earnings and financial condition.
If the consumer repays the obligation, he can enter into another one at any time. This solution allows constant access to cash. If the customer does not use the renewable limit, the lender does not charge interest.
A revolving loan can be used:
- Cash – withdrawing money from an ATM using a special card – e.g. thirteen card.
- As a bank transfer
- Cashless – by card payment for purchases.
Credit card – an alternative to a revolving loan
Credit card features a revolving loan. How does a credit card work? The consumer using the card as a means of payment, takes a loan from the bank. Then, during the billing period, the financial institution debits the client’s account – it recovers the borrowed amount, including interest. The advantage of credit cards is that they are honored around the world. Because service providers (e.g. hotels) can charge the customer’s account at any time.
When applying for a credit card, the borrower should be aware that the bank will check its history in BIK. People with poor scorcing scores will be cleared away.
Overdraft – as a form of revolving loan
Overdraft can be treated as a revolving loan. The bank account owner orders the service via an online application or phone call. Its amount depends on the monthly income. For basic accounts (e.g. accounts for zero), the overdraft is not high – it can usually be from 500 to 1000 USD.
Any inflow to the account is credited towards paying off the debt. In most cases, the deadline for paying the debit is 30 days.
A revolving loan from a financial institution – an offer for those in debt
A flat loan is a relatively new product. Interestingly, people with other financial obligations can apply for the service – e.g. mortgage, online loan or car loan. The contract is usually signed for a period of several months. During this time, the borrower can deposit and withdraw money at any time.
The interest rate is slightly higher than for a banking product. The advantages of the offer include that it can be used by people with poor scores. However, you should be aware that the borrower must have liquidity.