Life is full of surprises. Some of these surprises cost money. This is the case, for example, when your washing machine suddenly fails. It puts you in an unpleasant position. You need a washing machine, but you have already set aside your budget for other things. How can you solve that? For most people, taking out a revolving credit is the best option. With that you always have the extra bit of money available that is needed to pay for unexpected investments. Without having to go through the entire process of applying for a loan first.
Personal or business
A revolving credit comes in various forms. The best distinction can be made between a personal revolving credit and a business revolving credit. Of course one form is best for private individuals and the other form for entrepreneurs. Because even when you are trying to set up a company or want to take advantage of growth opportunities, you sometimes need some extra money quickly. That is why revolving credit is often also a good option for companies. In principle, both forms work in the same way. That means that you can always go to the bank when you need the money.
How does a revolving credit work?
It is actually very easy. The name actually indicates what it means. You take out a credit that will continue to exist as long as you do not give a counter notification. Suppose you agree with your lender that you want a loan of ten thousand euros. If everything is in order in the field of your credit history, then you will have the opportunity to withdraw and repay ten thousand euros when you need it. In whole or in parts. And when you have repaid everything, then you again have a loan of ten thousand euros that you can use.
It is important to note that it is generally the case that a monthly amount of repayment and interest is agreed upon. This means that you can withdraw and pay when you need it, but that you actually have to pay when you withdraw money. This is of course no more than logical. Ultimately, a personal revolving credit also remains a form of borrowing. You agree the repayment amount, including interest, with the lender when you take out the credit. This way it is clear to everyone from the start what is expected.
The big advantage of a revolving credit is that you can also pay off faster than the pace that you have agreed. Suppose you have an unexpected windfall and as a result get some extra money in your hands. Then you can use this nicely to replenish your credit a little faster. That also immediately saves you some interest costs because you get rid of your debt earlier. Moreover, faster repayment is in most cases completely penalty-free. So you don’t have to pay an extra cent if you can get rid of your debt faster.