What is a Revolving Loan?
A revolving loan is a type of loan that allows borrowers to use the borrowed money to pay back their existing loans. The borrower has a significant amount of flexibility to draw, repay, and redraw the sum at any time needed as long as it is before the final maturity of the loan contract – which is often extended. The borrower can also loan repeatedly as long as the outstanding amounts are paid off and capacity remains available.
Advantages
- Purchase and payment flexibility
- Easy application process
- A loan can be repaid at any time
Disadvantages
- Higher interest rates
- Can affect your credit score negatively
- More difficult to repay if you have a negative balance at the end of the month
- No fixed term or time frame can make the borrower pay interest for a long time
Types of Revolving Loans
Traditional lenders offer Revolving Loans, such as banks and credit unions, with stringent qualification requirements. Here are the following examples of Revolving Loans:
Credit Cards
Credit Cards allow borrowers to purchase products and services on credit with an amount ranging from $500 to $10,000 and more. The usual repayment term is 1 month, with interest rates between 18% – 23.99%.
Personal Line of Credit
A Personal Line of Credit allows borrowers to lend an amount ranging from $1,000 to $100,000 and more. The average repayment term for a Personal Line of Credit is between 6 months to 5 years and has an interest rate ranging from 5.71% – to 20.00%.
HELOC or Home Equity Line of Credit
HELOC allows borrowers to withdraw money up to a specific credit limit of up to 75% – 90% of their home equity. Its draw period is usually 10 years and the repayment period is 20 years, with interest rates between 3% – 9.9%.
What is an Installment Loan?
On the other hand, an installment loan is a type of loan that requires the borrower to pay a fixed amount of money at set intervals, usually monthly. This is a good option for those with a steady income and a regular budget.
Advantages
- Fixed payment term
- Fast application process
- Ability to pay off the loan at any time
Disadvantages
- Difficult to get approved
- Penalties on late payment
- Deadline to repay
Companies that Offer Installment Loans
Flex Money Ca.
Flex Money Ca. offers online installment loans for as low as $500 up to $15,000. Payment terms are from 6 months to 5 years, and have a starting interest rate of 18.9%. The overall process is simple and can be completed online.
Money Mart
Money Mart offers installment loans ranging from $1,000 to $15,000, with an APR of 19.90% to 46.90%. Their repayment term lasts between 12 to 60 months, and they accept a variety of payment frequencies.
Magical Credit
Magical Credit offers installment loans starting at $1,500 up to $20,000, with an interest rate between 19.99% to 46.8%. Payment terms can be arranged from 12 to 60 Months. They also allow borrowers with bad credit to apply and enjoy the same benefits and flexible payment terms.
Frequently asked questions
Which type of loan is better?
How long does it take for the loan to be approved?
How can I know if I am eligible for a loan?
Can revolving loans affect your credit?
Can installment loans affect your credit?
Can I apply for an installment loan if I have bad credit?
Conclusion
In choosing a loan option that is best suited for your financial situation, it is essential that you understand the types of loans available, the risks associated with each loan type, and the terms and conditions before signing up. Also, try your best to stick to repayment agreements to avoid hurting your credit score. Learning to manage your debts is one of the best things you can do to have a better financial situation.
Big Piggyy
"Show me the MONEY!!!" – Jerry Maguire
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