A revolving loan is associated with the client’s personal account. The credit limit is added to the account balance and automatically renews after each use, with inflows to your personal account.
The concept of a revolving loan
A revolving loan is a type of cash loan. It can be said that it is a variation of working capital loans. It is always associated with the borrower’s bank account and perhaps this often identifies him with the debit. Debit and revolving credit remain two separate financial products that, however, have different goals to fulfill.
Another terminology used in the case of a revolving loan is the bank offering it in the form of a revolving credit or credit line. The purpose of such a commitment is to increase the funds available on your account by a certain amount.
The procedure for obtaining a revolving loan
You can apply for a revolving loan at any bank, but the easiest way to do it is at the institution where the customer already has a personal account. As has already been indicated, a revolving loan is linked to the customer’s invoice. At another bank, you must first open an account to be able to obtain a revolving loan.
This loan will be granted at the customer’s request, if it has a sufficiently high creditworthiness confirmed by relevant documents and has a good credit history at the Credit Information Bureau. Sometimes the client will not attach to the loan application eg a statement of the amount of income received, because the bank will calculate its creditworthiness on the basis of cash flows on its account.
How is a revolving loan used?
In practice, granting a revolving loan involves adding a specific credit limit to the client’s personal account balance. Thus, the amount available to the borrower increases.
The use of the revolving loan amount only begins when the account holder has used all his own funds. Interest on the loan is accrued on the amount used until the debt is repaid. The repayment takes place each time a payment is made to a bank account. Then the loan is renewed and the account holder who knows you will be able to use it in the future. When there is a total repayment of the liability, interest is not accrued from the day after it is made.
As a standard, the revolving loan agreement is concluded for 12 months and is automatically extended. As a rule, banks charge an additional fee for the servicing of a revolving loan.