With a revolving credit you are completely free in the way you spend the borrowed money. Revolving loans are provided by banks, financing companies and by municipal credit banks.
Typical for all forms of revolving credit are:
- The borrower is given the option to withdraw amounts of money or to purchase goods or services at any given time, up to a certain limit amount.
- The borrower may, within certain limits, withdraw the repaid amounts.
- Early repayment of the loan is always permitted, no extra costs will be charged for this.
- The interest rate can be changed at any time during the term
You must meet the following conditions for a revolving credit :
- Your age is between 18 and 60 years.
- You have the Dutch or Belgian nationality or a permanent residence permit.
- You have a fixed and regular income (some lenders require a permanent employment contract).
- You must be able to prove the amount of your other financial obligations (eg housing costs, other debts, alimony).
- Sometimes your partner’s income is included in the assessment of your application.
When assessing your application, the lender also checks your information regarding your payment history.
The installment amount
Your payment obligation with a revolving credit consists of a monthly installment amount. This installment amount is a fixed percentage of the limit, usually 2%. With a limit of 10,000 euros, the installment amount is therefore 200 euros. This includes both interest and repayment of the loan amount. As the term expires, the interest payment will become an increasingly smaller part of the term amount, while the repayment model becomes larger and larger.
Recordings and follow-up recordings
With a revolving credit you do not have to withdraw the credit sum at once. You can have your credit limit when it suits you. You can withdraw the amount in one go or in parts. Amounts that you have repaid can also be withdrawn again.
With revolving loans , there is no fixed, predetermined term. On the one hand you can also withdraw the repaid amounts and / or make additional repayments. On the other hand, the rate can be adjusted during the term of the loan. This makes the duration of the loan difficult to predict.
However, revolving loans have a theoretical term. This is the number of months that the borrower would normally need to repay the outstanding debt and the interest owed. It is assumed that:
- the full principal sum is immediately included.
- The rate does not change.
- No follow-up shots.
- No additional repayments take place.
- The installment amounts are paid monthly on time.
- However, a term that is calculated on the basis of these assumptions is of little use in practice: as soon as the rate changes or follow-up withdrawals and / or additional repayments take place, the remaining term already changes.
- You can deduct only the interest on loans used for renovation or improvement of your first owner-occupied home on your tax return.
You can always pay extra with a revolving loan. With this you increase your possibility to make follow-up shots later, when you are a bit tighter.
With a revolving credit you must pay the installment amount on time every month. If you do not, a backlog will arise and the lender will take measures to still receive the payment (s) due. A payment arrears is considered as a follow-up withdrawal for a revolving credit. This is added to the outstanding debt. Only when overdue payments exceed the limit, the lender may charge default interest on the excess. This is linked to a legal maximum.
Forms of a revolving credit:
- Continuous money credit: this form of credit gives you a great deal of freedom. You can easily withdraw an extra amount in expensive months. And just as hassle-free you can reduce your debt in times when you are better off with cash.
- Continuous goods credit: this concerns loans with relatively low limit amounts, which are mainly offered by retailers to customers who want to pay their purchases in installments. Well-known form of this is the mail order or shipping house credit