How revolving credit works

How revolving credit works

How revolving credit works

Having creditors hound you over payments that you are unable to make can be incredibly stressful. With revolving debt, such as credit cards, it is easy to pile up debt that is seemingly impossible to pay back.

However, there is hope. Instead of giving up and filing for bankruptcy, Budget Build Buy can help you fix your mounting debt from revolving credit. In order to eliminate debt, it’s crucial to first understand the source. Read on to learn more about how revolving credit works.

What Exactly is Revolving Credit?

Revolving credit—also referred to as an “evergreen loan”— is a flexible type of credit that can be used repeatedly once it is paid off. It provides the borrower with a set amount of credit and allows them to repay and use any of the available credit. Repayment of a revolving loan is usually scheduled on a monthly basis or can be paid in full before termination.

Distinguishing Characteristics

In understanding how revolving credit works, it is important to note that there is a set credit limit, and that the borrower will pay interest on the amount they have spent. Although there is the option for the borrower to pay the balance in full, if paying the balance over a period of time, most revolving credit has a mandatory minimum payment. Essentially, revolving credit is the basis of how credit cards function.

Rollover Loans

When someone uses revolving credit to pay for another loan with a similar interest rate and payment date, this is referred to as a rollover loan. Rollover loans are common because it is a simple solution to pay off credit debt. However, rollover loans pave the way to fall even deeper into credit card debt.

Revolving Credit Debt

Revolving loans inadvertently create more debt as it eliminates older debt. Especially if you are simply paying the minimum balance, the interest rate can cause credit cards to exceed the monthly limit. Overall, revolving credit debt can be avoided if you are mindful of your credit limit and aim to pay more than than the minimum payment.

Revolving credit debt does not have to control your finances. Discover an effective way to conquer your debt with Budget Build Buy. Consult with us for help reaching a debt settlement with your credit card company today.

How revolving credit works

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