What is a Revolving Loan?

A revolving loan is a type of credit agreement that provides borrowers with access to a predetermined line of credit, which they can use repeatedly up to a certain limit. Unlike traditional term loans, where borrowers receive a lump sum upfront and repay it over a fixed period, revolving loans offer more flexibility in borrowing and repayment.

Key features of Revolving loans:

1. Flexible credit line: 

Revolving loans establish a maximum credit line based on the borrower’s creditworthiness and financial situation. This credit line acts as a pool of funds that the borrower can draw from as needed, up to the specified limit.

2. Continuous availability: 

Once approved, borrowers can access funds from their revolving credit line at any time, without the need for reapplying. This feature makes revolving loans ideal for covering ongoing or unpredictable expenses.

3. Variable borrowing amounts: 

Borrowers have the flexibility to borrow varying amounts, depending on their financial needs. They can choose to borrow the full credit line amount or only a portion of it, depending on their requirements.

4. Flexible repayment terms: 

Revolving loans typically require minimum monthly payments, which are calculated based on a percentage of the outstanding balance. Borrowers have the option to repay the full balance or make partial payments, as long as they meet the minimum payment requirement.

5. Interest accrual: 

Interest is charged only on the amount borrowed, and it accrues daily based on the outstanding balance. This means that borrowers can minimize interest costs by repaying their balances promptly.

6. Credit line management: 

Lenders may periodically review borrower’s creditworthiness and payment history. A positive payment record may lead to automatic increases in the credit line, providing borrowers with access to additional funds over time.

Advantages of Revolving loans:

Flexibility: 

Borrowers have the freedom to use funds as needed, making revolving loans suitable for both planned expenses and unexpected emergencies.

Convenience: 

With continuous access to funds, borrowers can address financial needs promptly without the hassle of reapplying for a new loan each time.

Cost-effective: 

Borrowers can save on interest costs by repaying balances quickly, as interest accrues only on the amount borrowed.

Builds Credit: 

Responsible use of revolving credit can help borrowers build a positive credit history, potentially improving their credit score over time.

A revolving loan offers borrowers a flexible and convenient way to access funds when needed. With its revolving nature and customizable terms, it provides a versatile financial solution for individuals and businesses alike, offering the freedom to manage finances according to changing needs and circumstances.

If you are interested in a revolving loan, Etomo would like to introduce our ‘Etomo Revolving Loan.‘ Click here to apply:“