Every day, lending companies close existing loans at a lower interest rate and better conditions. From the conversations I have with clients, it appears that they do not always know exactly what type of loan (s) they have.
To make a good choice for a loan it is important that you know what type of loan you have and what characteristics this loan has. That is why I am happy to explain in this article how a revolving credit works.
The revolving credit is a flexible form of credit. With a fixed revolving credit you pay a fixed percentage of the repayment and interest limit each month. With a variable revolving credit you pay a fixed percentage of the outstanding balance in installments and interest.
Suppose you borrow 25,000 euros and you agree that your monthly installment is a fixed percentage of 1%. After 1 year your debt is still 20,000 euros. Your monthly period is then:
– Fixed revolving credit 1% of the limit of 25,000 euros is 250 euros per month.
– Variable revolving credit 1% of the balance of 20,000 euros is 200 euros per month.
The interest on a revolving credit can rise or fall every month. This can affect the duration of your loan
. It does not immediately mean that with a rise in interest rates your monthly installment will also rise. It does mean that the amount that you repay each month decreases because the interest share increases within your monthly period.
With a revolving credit you can always repay (in whole or in part) penalty-free extra. The amounts that you pay off during the term can possibly be withdrawn again. This allows you to withdraw unlimited money up to the agreed credit limit when necessary. With a revolving credit you have money in hand this way.
Features Revolving credit:
- Withdraw money up to the credit limit when you need it
- A variable interest rate and duration
- You only pay interest on the amount withdrawn
- You pay a fixed monthly installment (2%, 1.5% or 1% of the credit limit or outstanding balance)
- You can always pay off without penalty
Do you have questions about the revolving credit or are you interested in a free quote? Please feel free to contact me or one of my colleagues. Of course we are also happy to assist you with all your questions about other forms of credit.