Revolving Credit

Revolving Credit refers to a type of Credit that allows the borrower to access a maximum Credit limit and borrow against it repeatedly as needed. The borrower can carry a balance from month to month, and interest is charged only on the outstanding balance. Payments can vary based on the amount borrowed and the terms set by the lender.

Examples of revolving Credit include:

• Credit Cards: A common form of revolving Credit where users can make purchases up to their Credit limit, repay them over time, and borrow again.
• Equity/">Home Equity Lines of Credit (HELOCs): Allows homeowners to borrow against the Equity in their home up to a specified limit, with the ability to withdraw and repay funds multiple times.

Cases:

• A person with a Credit card has a limit of $5,000. They charge $2,000 in purchases and pay $1,000 at the end of the month, leaving a balance of $1,000. They can borrow up to $4,000 again in the future.
• A homeowner with a HELOC of $50,000 uses $20,000 for home renovations. They repay $5,000 within the year and can access the remaining $30,000 whenever needed.