Revolving credit

Revolving credit

Revolving credit is a type of credit that does not have a fixed number of payments, in contrast to installment credit. Examples of revolving credits used by consumers include credit cards. Corporate revolving credit facilities are typically used to provide liquidity for a company's day-to-day operations.

Typical characteristics

  • The borrower may use or withdraw funds up to a pre-approved credit limit.
  • The amount of available credit decreases and increases as funds are borrowed and then repaid.
  • The credit may be used repeatedly.
  • The borrower makes payments based only on the amount they've actually used or withdrawn, plus interest.
  • The borrower may repay over time (subject to any minimum payment requirement), or in full at any time.
  • In some cases, the borrower is required to pay a fee to the lender for any money that is undrawn on the revolver; this is especially true of corporate bank loan revolving credit facilities.

Examples

See also

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