The revolving credit has been one of the most popular forms of credit on the market for many years. This has everything to do with the fact that this type of loan excels in terms of flexibility. Many people nowadays face an unstable financial situation. This ensures that taking out a personal loan involves too many risks. If you do not pay on time for this type of credit, you will already be confronted with a (not insignificant) penalty interest. This is not the case with a revolving credit. With this form of credit, it is true that you can request repaid amounts without any problems. Does this sound like music to you and would you like to know more about this special form of credit? Then read on!
Extremely flexible credit terms
When we talk about a revolving credit, we must of course start by focusing on the flexible conditions of this credit form. In the first instance, for example, you can count on a flexible end date when taking out a revolving credit. This means that there is no fixed duration. At first glance this seems of course very interesting, but there is also a considerable risk involved. Due to the lack of an end date, this form of credit is sometimes referred to as a “dead-end credit.” Many people simply let this loan run endlessly, but forget that they have to pay not inconsiderable costs for it.
Fairly high variable interest
The above immediately brings us to the second point, which is the interest charged on a revolving credit. Compared to a personal loan, this form of credit does not involve a fixed interest rate, but a flexible interest rate. This ensures that the interest rate can actually change at any time throughout the term of the credit agreement. This can have a positive but also negative effect for you as a borrower. A little financial reserve is therefore not a superfluous luxury in this area. In addition, the flexible conditions of a revolving credit ensure that the interest that is charged is structurally higher compared to, for example, a personal loan. The interest due is always calculated on the basis of the outstanding credit amount. In other words, do you want to keep the costs as low as possible? Then it is mainly a question of keeping the outstanding amount of your revolving credit to a minimum.
Perform additional repayments without penalty
It can also perfectly happen that you have some extra financial resources at a certain point in time, which means that you no longer have to use your revolving credit, for example. With any other form of credit this is a problem and you will be forced to pay the monthly installments neatly. This is not the case with a revolving credit. After all, with a loan like this you can make one or more additional repayments without any problem without having to pay a penalty interest. Moreover, these extra repayments will ensure that the global interest that must be paid will be considerably lower, so that you can kill two birds with one stone.
Reclaim already repaid amounts? No problem!
Just as it is possible to repay more without penalty than established, it is also possible with a revolving credit to reclaim amounts already repaid. For this, too, no penalty should be taken into account. The direct consequence of this, however, is that the periodic interest that must be paid becomes higher. After all, with a revolving credit, the interest is calculated in full based on the outstanding amount. The higher this amount, the more costs you will have to pay.
Be attentive to the risks of a revolving credit!
Basically a revolving credit is a very interesting form of credit that can mean a structural solution to a financial problem in many different situations. However, this does not alter the fact that in addition to all the benefits there are also some risks that you will want to take into account. The fact that a revolving credit has very flexible benefits is very interesting for many people, but it should also be taken into account that these are not always as safe. A characteristic of a revolving credit is, for example, that it is often held longer than strictly necessary. This in itself is not a problem, were it not for the fact that continuous costs are then due. Moreover, it is very tempting to lean against the limit in a revolving credit, not because you really need the money, but simply because it is possible. However, applying this method will always ensure that you will have to pay very high costs over the entire duration of your revolving credit. Needless to say, this does not benefit your financial situation.
What makes a revolving credit more interesting than a personal loan?
Many potential borrowers believe that the personal loan and the revolving credit are two competing forms of credit. However, that is not the case at all. This is because these two types of loans appeal to a completely different target group. After all, a borrower who chooses to take out a personal loan opts for security. He is aware that he must repay a certain amount of the loan amount each month and does not foresee any structural problems in this area. These are two things that are missing from the target group of a revolving credit.
People who choose to take out a revolving credit are after all looking for flexibility. They always want to have sufficient financial resources when, for example, an interesting investment presents itself at a certain moment. On the other hand, a revolving credit can also offer a solution to people who often have difficulty paying their invoices at the end of the month. The moment that you as a borrower need flexibility, you will be able to determine that opting for a revolving credit is actually the only real best option for you.