Considered as a permanent loan, the revolving credit is renewable until the debtor and the creditor have closed it. As this is an atypical financing, this type of credit is different from conventional loans. Indeed, the allocation of credit, the repayment of the loan and even its release are quite distinct.
Revolving credit can be beneficial only if the borrower has pre-arranged the use of the loan. Otherwise, it may incur costly financial burdens without real benefits. For all these reasons, it is necessary to know the characteristics of the revolving credit before contracting it. What are the elements to know before contracting a revolving credit? How to unlock and manage it?
Before taking out a revolving credit
The study of a revolving credit offer is an essential step to measure its cost, its real contributions and its disadvantages. To have a global view of the cost of the loan, it is suggested to compare several offers of revolving credit online. This is the most effective way to judge the benefits of a given offer and to know if the loan is being allocated at a low lending rate.
In addition, the revolving credit is easy to use, the account is automatically reloaded and the debtor can benefit from an inexhaustible amount of money to manage his purchases and expenses. However, this simplified use of credit can be dangerous in the sense that it can lead to catastrophic over-indebtedness if the debtor does not follow up on his loan. Before taking out a revolving credit, negotiate the monthly payments and read the clauses of the contract as well as the terms of repayment.
Unlock and use of revolving credit
Unlike the credit allocated, the revolving credit can be used for a variety of purposes. the borrower will not have to justify its use in order to unlock it. Indeed, it does not require tedious procedures, just a credit card to unlock the reserve. However it is in the interest of the borrower to properly manage its revolving credit to avoid additional costs.
On this fact, according to the Lagarde law, the maximum amount of revolving credit must not exceed € 75,000. The higher the amount borrowed, the longer the repayment period. If the credit is less than 3000 €, the repayment term is 36 months. Beyond this amount, the refund can be done over 60 months. It should be noted that for a loan of 1000 € or more, the lender is obliged to also offer a depreciable credit so that the borrower can choose the offer that corresponds to it.
Closing a revolving credit
The revolving credit is only attractive for one-time use because the interest rate increases from one year to the next. Once the amount borrowed is repaid, it is possible to cancel a revolving credit.
How to pay a revolving credit? Simply make a request for cancellation three months before the repayment deadline and pay the loan.