What Is a Revolving Credit Loan?

A revolving credit loan, also known as a line of credit, is when you receive a check for a specific credit limit rather than having a credit card on which you charge items up to your maximum credit limit. A revolving credit loan allows you to keep getting more money if needed as you pay off the loan, unlike traditional installment loans.

Application

A customer applies for a line of credit with a bank, finance company or credit union and undergoes the qualification process, which may require submitting financial documents such as pay stubs. The loan officer will approve or deny the request and, if approved, issue a credit limit.

Major Lenders

Major lenders offering these types of revolving credit loans include Bank of America and Citibank (see Resources). Their applications can be completed online.

How It Works

Many lenders will issue a checkbook for the line of credit, so you can use the revolving credit loan like a bank account. Once you start using the loan funds, you will be expected to pay fixed installments each month until the account is paid off.

Fees

Unlike credit cards, writing checks against your line of credit does not incur any cash-advance fees because this is considered a cash revolving credit loan.

Risks

Traditional installment loans do not allow you to keep borrowing money from the same account as you make payments, making it easier to get out of that debt more quickly. A revolving credit loan is like a credit card that can keep being used.

Resources

• Citibank
• Bank of America