What Is a Revolving Line of Credit?

A revolving line of credit gives you ongoing access to funds up to a set amount. Unlike a traditional loan, you don't receive a lump sum all at once. Instead, you take what you need, when you need it. 

This type of credit may be a good fit if you have recurring expenses, an ongoing project, or simply want a financial cushion available when you need it.

Revolving line of credit definition 

A line of credit is a type of open-ended credit with a pre-approved limit. 

Here's how it works in practice: say you're approved for $1,000 but only need $400 today. You take the $400, and $600 stays available in your account — with no interest charged on that remaining amount until you use it. When you repay what you've used, that amount becomes available again.

That's what makes it "revolving." The funds replenish as you pay them back.

A revolving line of credit is different from a non-revolving option, like an installment loan or payday loan, which gives you a fixed amount upfront and a set repayment term.

How revolving credit works 

A revolving line of credit gives you ongoing access to funds up to your approved amount. Here's a simple breakdown of how it works:

1. Get approved. Apply through a bank, credit union, or trusted lender. Your lender will set your available amount and the terms of your account.
2. Take your first advance. Choose as much or as little as you need, up to your available amount. You'll only pay for what you use.
3. Make payments. You can pay extra or pay the minimum amount. You won't be charged a penalty for paying off your balance early.
4. Funds replenish as you repay. As you make payments, those funds become available to use again.
5. Advance funds as needed. Those available funds are there for you to use as often — or as little — as you need.
6. Keep your account open. As long as you make your payments and keep your account in good standing, your line of credit stays open until you choose to close it.

Examples of revolving credit 

Revolving credit can be either secured or unsecured. Here are the most common types: 

Personal line of credit 

A personal line of credit gives you access to funds up to a set amount. You only pay interest on what you use, and as you repay, those funds become available again. Personal lines of credit are typically unsecured, meaning no collateral is required.

Home equity line of credit (HELOC) 

A HELOC allows you to borrow against your home's equity (market value minus mortgage balance). During the draw period (5 to 10 years), you can access funds up to your credit limit. You then repay the principal and any interest on the amount borrowed. 

Business line of credit 

A business line of credit works similarly to a personal line of credit but is designed for business needs. It can be used for payroll, operating expenses, equipment, improvements, and more — and is available to businesses of all sizes. 

Credit card 

A credit card is one of the most common types of revolving credit. You can spend up to your available amount, repay it, and spend again. Depending on the card, you may earn rewards like cash back and travel points. And if you pay off your balance in full each month, you won't pay interest. 

Each type of revolving credit works a little differently, so it's worth taking the time to find the option that fits your needs. 

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Revolving credit vs. installment loans 

Revolving credit gives you ongoing access to funds up to your available amount for as long as your account remains open and in good standing. You can make minimum payments or pay off your balance in full — it's up to you.

Installment loans give you a fixed amount upfront and a set repayment schedule. Use the funds for whatever you need and repay over time in regular installments. 

Common uses for revolving credit 

• Utility bills, gas, and other regular expenses
• Recurring payments like student loans or subscriptions
• Ongoing home improvement projects
• Medical bills or other costs you're managing over time

Common uses for installment loans 

• Replacing a home appliance
• Paying off a substantial bill
• Debt consolidation
• Purchasing furniture or other big-ticket items 

Tips for using a revolving line of credit 

If you decide to open a revolving line of credit, keep these tips in mind:

Only use what you need 

Having ongoing access to funds can make it tempting to use more than you planned. To keep your balance manageable, only take what you need. You can always access more funds later if your situation changes. 

Make on-time payments 

Once you take an advance from your line of credit, make your payments on time. This keeps your account in good standing, helps you avoid extra fees and interest charges, and ensures those funds stay available when you need them.

Pay more than the minimum when you can

You'll need to make your minimum payments each billing cycle you carry a balance — but paying more than the minimum (even a little) can reduce the amount you pay over time. 

Choose the right type for your needs

Not all revolving credit works the same way. Credit cards are widely available but may come with higher interest rates. HELOCs require home equity. Business lines of credit are designed for business use. A personal line of credit can be a flexible option if you're looking for straightforward access to funds without collateral.

Open a revolving line of credit today 

At Advance America, we offer personal lines of credit online and in store. Depending on when you’re approved, you may even receive funds from your first advance the same day.^* 

Apply now
 

^{*Online approvals before 10:30 a.m. ET (M-F) are typically funded to your bank account by 5:00 p.m. ET the same day. Approvals after 10:30 a.m. ET are typically funded in the morning on the next business day.} 

Revolving line of credit FAQs 

Does a revolving line of credit affect your credit score? 

It can. Depending on whether your lender reports to the credit bureaus, making consistent, on-time payments could help improve your score. Late payments or an unpaid balance can bring it down. 

Is it good to have revolving credit? 

Revolving credit can be a good fit if you want ongoing access to funds for recurring or unexpected expenses — things like utility bills, everyday costs, or a one-time purchase you weren't planning for. The flexibility to use what you need, when you need it, is what makes it useful.

How much can you get from a revolving line of credit? 

Your lender determines your available amount. Banks and credit unions often offer higher limits, but they typically require a stronger credit history. At Advance America, we consider factors beyond your credit score. Depending on your state, you may be able to open a line of credit with up to $3,000 in available credit.

🔗 Related: How to Get a Line of Credit for Bad Credit