Revolving credit is characterized by the provision of an “inexhaustible” reserve of money, in which the borrower can draw at any time according to his needs. A concept a priori simple. How does this consumer credit work? Are there any disadvantages? Good Credit, the online personal loan specialist, takes stock for you.
Revolving credit: what is it exactly?
Also called revolving credit, revolving credit or permanent credit, revolving credit is a form of consumer loan. It is therefore not linked to a specific purchase and does not require proof of use. This type of loan can be offered by a bank, a credit organization, but also by a physical sign or an online sales site.
Concretely, revolving credit consists of the provision of a sum of money that the borrower can use according to his will. The latter can use it in part, in full, and make purchases in one or more installments. The only imperative: do not exceed the maximum authorized amount.
What is special about this type of loan? The money reserve decreases with each purchase, then is replenished as the monthly payments are reimbursed by the borrower.
Good to know: obligation of the lender for a loan over $ 1,000
As soon as the credit exceeds $ 1,000, the bank is required to accompany its offer with a loan proposal that can be amortized for comparison. That is to say, a loan whose monthly installments include part of the capital and part of the interest throughout the repayment period.
Credit status and duration of a revolving credit agreement
When the loan offer is accepted, the lender must send the borrower a monthly summary of the credit status. In particular, the latter must mention:
- the share of available capital;
- the date of payment;
- the amount of reimbursement already made;
- the rate applied over the period;
- the overall effective annual rate;
- the number of monthly payments due to arrive at the full repayment of the loan.
The term of the revolving credit agreement is 12 months. Most often, this type of contract is renewed by tacit agreement. Three months before the due date, the bank must inform the borrower of the conditions of renewal of the said contract and of the terms of reimbursement of the sums remaining due.
The borrower is entitled to oppose it, and therefore to terminate his loan contract (up to 20 calendar days before the effective application of the modifications). In this case, he will have to proceed to the full reimbursement of the amount used from the money reserve.
Reserve of revolving credit money, instructions for use
The use of the money reserve can be done by different means.
Use of the money reserve via a bank transfer
This is probably the most common way to use your money reserve. The transfer request can be made online, from the bank’s website or application, but also by phone or e-mail. The borrower only has to indicate the amount he wishes to borrow (within the limit of the capital available). The money is then transferred to his bank account (usually within 48 hours).
Often in a loan contract of this type, a payment card is included. This allows the borrower to make purchases on credit. At the time of the store transaction, you will then have to choose the “on credit” option. Because by default, it is the “cash” option which is selected on payment terminals. This payment card can also be used to withdraw cash from the ATM. The amount will then be debited from the available money reserve.
Revolving credit and insurance
As with any consumer loan, the law does not require the borrower to take out insurance. However, the lender can tax it, especially if the amount of money loaned is large. In addition to the loan offer, he can then offer an insurance offer. The borrower is free to accept it or not. The latter is in fact entitled to take out insurance with a third-party establishment to ensure its credit.
Personal loans to get around revolving credit traps
Revolving credit is therefore easily accessible and has few usage constraints. The downside is that the permanent availability of the money reserve is tempting for the borrower.
In addition, the rates applied to revolve credits are variable and often very high. The risk, over time, is over-indebtedness. To have money at hand in the event of a hard blow, there is a much cheaper alternative: the depreciable personal loan at a fixed rate, as proposed by Good Credit.
The advantages for the borrower are multiple:
- amount and duration of credit known in advance;
- stable monthly payments for the duration of the loan;
- budget under control.
With Good Credit, build up a risk-free reserve of money! Our credits, 100% transparent, are devoid of hidden defects. You can also make a prepayment free of charge, regardless of the amount of your personal loan. Younited is simple, clear and reassuring!