Personal loans, consumer loans, mortgages, pledge loans … and now also revolving loans? What is this category of credit with an Anglo- Saxon name?? Are other loan formulas better for us or better? Below, we tell you five things about this financing option so that you do not have doubts about its nature and use.
1. With the revolving credit only interest is paid for the amount withdrawn
Revolving credit, despite being marketed under such an exotic name, is nothing more than a line of credit like the ones we offer at Astro Credit. That is, it is a credit policy that a client subscribes with a financial institution and is characterized by its rotating nature: a certain credit limit is granted that the client may use in whole or in part and, as the initial amount is restored. , the client will be able to use again the initial amount granted during a specific period.
One of its characteristics is that interest is paid only for the amount withdrawn instead of the full amount of the credit. For example, if we have been granted a revolving loan of 3,000 dollars, but in a given month we only need to use 1,200 dollars, when we return the 1,200 dollars plus the corresponding interest accrued, we will once again have the 3,000 dollars granted, so that We can use them if we have another specific need for liquidity.
Also, another difference that separates these credits from credit cards is that the borrowed money is transferred directly to our bank account, instead of having it through a card with which we can make purchases or withdraw the corresponding cash. . With the card, if we had to face a direct payment, we would have to withdraw the money and deposit it in our bank account so that the receipt would be charged there, while with revolving credits, the money arrives directly at our account, which that saves us headaches and hassles in this regard.
2. They are also known as revolving credits or revolving credits
Although their Anglo-Saxon name may be somewhat foreign to us at first, financial institutions also market them under the name of revolving or revolving loans. As we said in the previous point, its name comes from its rotating or renewable nature. As the refund of the withdrawn amount is carried out, the initial amount granted from the credit line is recovered.
3. Revolving credit is characterized by flexibility in its repayment
Revolving credits differ fundamentally from one of the usual alternatives, credit cards in use, in that it is not necessary to make a fixed payment stipulated at the end of the month, but they offer the possibility of paying the amount borrowed in a much more flexible, or amortize the debt early if we prefer.
4. There are so-called revolving cards
In addition to the loans themselves, some banks offer revolving credit cards, the characteristics of which can be summed up in that the purchases or withdrawals of cash made with them are deferred until the following month, so that you can enjoy liquidity even though money is not available in the bank at that time. Therefore, its operation is very similar to that of credit cards of a lifetime: the credit card limit is reduced with the different purchases made at your expense and is restored with monthly payments.
In general, the customer can choose two payment methods with these cards:
to. Fixed payment
A fixed monthly amount is paid, which will depend on the specific contracted conditions (some entities, such as BBVA, usually impose figures between 20 and 200 dollars).
B. Payment according to a percentage
The cardholder will pay a percentage of the amount used monthly. That percentage will depend on minimums and maximums that will be established according to the conditions of the card that have been signed with the bank; the usual limits range from 3% to 25%.
5. Knowing our financial situation is key to proper management
As it happens when we request any other type of financing, knowing our financial situation is essential to be able to manage this type of loan well. So, since interest tends to rise the longer the repayment term, establishing a monthly budget that allows us to manage our personal finances and allocate the largest possible percentage to the loan will allow us to save a not inconsiderable amount in interest. However, its flexibility can also play in our favor if we face an especially tough month financially speaking, so we can adapt the quota to our circumstances at all times. It is also essential that we are realistic and do not resort to credit by system, but that we use it as an option that can make life easier for us at any given time.
On the other hand, in addition to acting with leadership when managing our finances, it is crucial that, if we opt for a loan of this nature, we trust entities that respect the principles of responsible lending or responsible lending, such as Credit. These principles can be summarized in three: ethics, transparency and responsibility.