How Revolving Credits Are Different from Lines of Credit
How Revolving Credits Are Different from Lines of Credit
In simple terms, both lines of credit and revolving credits are financing arrangements made between a lending institution on one side and an individual or business on the other. However, there are some key differences between the two.
Revolving Credits
These credits are sometimes called as revolving agreements by some financial institutions. They are a dynamic financial product where you would be offered more credit to spend when you pay the credit down, most preferably when you make consistent, regular payments on the revolving credit account. They are used as a safeguard in times of cash flow problems or to finance capital expansion. Meanwhile, individuals go in for revolving credits so as to cover large ongoing expenses such as the renovation of a house or paying medical bills.
Line of Credit
This is a one-time financial arrangement, or what can be said to be a static product. The account will be closed once you have wholly spent the set amount of credit. Because you are not lent a lump sum of money or charged any interest, the payments on lines of credit tend to be more irregular. A line of credit is basically the ability to borrow funds up to a particular amount in the future. Furthermore, the borrower will not be charged interest until they start tapping into the line for funds.
