Revolving Line Of Credit

Instead of borrowing a fixed amount of money all at once, a revolving line of credit allows you to repeatedly withdraw funds up to a set credit limit. If you’re looking for a flexible loan, a revolving line of credit may be worth considering. Here’s a closer look at what a revolving line of credit is and how it works.

How do revolving lines of credit work?

With a revolving line of credit, you can withdraw as much or as little as you’d like up to the maximum amount, which is known as your credit limit. As you repay your balance plus interest, you’ll be able to borrow the principal amount you’ve repaid against the account again.

You may make your minimum payments and “revolve” or carry the rest of your debt to the next month or billing period. Just keep in mind that you will have to pay interest whenever you do so. You can use a revolving line of credit to manage your monthly expenses or cover unexpected costs.

Types of Revolving Lines of Credit

Types of revolving lines of credit

There are several types of revolving lines of credit, including:

Personal line of credit

A personal line of credit can allow you to withdraw money up to your credit limit for a set period of time. You’ll only pay interest on the amount you borrow. This type of revolving credit is usually unsecured, meaning you don’t have to secure it to collateral like your house or car.

Home equity line of credit (HELOC)

A HELOC lets you tap into your home’s equity, which is your home’s current market value minus your mortgage balance. During the draw period (which can range from 5 to 10 years), you can borrow what you need up to your set credit limit. You’ll then have to pay back the principal and any interest on what you borrowed.

Credit card

With a credit card, you can spend money up to the set credit limit, repay it plus interest, and spend again. You can continue to use your credit card as long as your account is open and you’re in good standing.

Depending on the card you choose, you might even earn rewards like cash back and travel points. If you pay off your balance in full each month, you can avoid paying interest altogether. Otherwise, you’ll probably face a higher interest rate than you would with a personal line of credit or HELOC.

How can a revolving line of credit affect my credit score?

A revolving line of credit can have a positive or negative affect on your credit. If you make your payments on time every month and keep your balances low, you can improve your credit score. On the other hand, late or missed payments and maxing out your credit lines may hurt your credit.

Tips for using a revolving line of credit

If you use a revolving line of credit, consider these tips:

Borrow only what you need

A revolving line of credit can make it easy to overborrow. Since doing so can cause you to accumulate more debt, only borrow what you need. You can always withdraw more funds if you need to at a later time.

Make on-time payments

Once you withdraw money from a revolving line of credit, be sure to make your payments on time. Not only will you be able to continue to borrow funds from your account, you’ll also improve your credit score.

Pay more than the minimum whenever possible

If you use a revolving line of credit, you’ll be asked to make a minimum payment at the end of every month or billing period. But if you repay more, you’ll save money on interest. This can lead to hundreds or even thousands of dollars in savings.

Get an Advance America line of credit

Advance America offers flexible lines of credit, including to borrowers with poor credit. You may apply online and get your money quickly, sometimes that same day. A line of credit from us can help you cover a variety of unexpected or unpredictable expenses without the hassle.

The Advance America advantage

Since 1997, Advance America has helped millions of hardworking people with a variety of financial solutions including Payday Loans, Online Loans, Installment Loans, Title Loans and Personal Lines of Credit.
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