Personal loans, consumer loans, mortgages, pledge loans … and now also revolving credits? What is this category of credit with an Anglo-Saxon name? Are we better or are other loan formulas better? Next, we tell
Personal loans, consumer loans, mortgages, pledge loans … and now also revolving credits? What is this category of credit with an Anglo-Saxon name? Are we better or are other loan formulas better? Next, we tell you five things about this financing option so you have no doubts about its nature and use.
1. With revolving credit only interest is paid for the amount withdrawn
Revolving credit, although it is marketed with such an exotic name, is nothing more than a line of credit like the ones we offer at MoneyLite Bank. That is, it is a credit policy that a client signs with a financial entity and is characterized by its revolving nature: a certain credit limit is granted that the client may use totally or partially and, as the initial amount is restored, the customer may once again have the initial amount granted during a specific period.
One of its characteristics is that no interest is paid except for the amount withdrawn instead of the full amount of the credit. For example, if we have been granted a revolving loan of 3000 dollars, but for a given month we only need to use 1200 dollars, when we return the 1200 dollars plus the corresponding interest accrued, we will have the 3000 dollars initially granted, so that We can use them if we have another specific need for liquidity.
Also, another of the differences that separate these credits from credit cards is that the money borrowed 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 domiciliary payment, we would have to take out the money and enter it in our bank account so that the receipt could be charged there, while with revolving credits, the money arrives directly to our account, That saves us headaches and inconvenience in this regard.
2. They are also known as revolving credits
Although its Anglo-Saxon name may be somewhat foreign to us at the beginning, 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 character. As the refund of the amount withdrawn is made, the initial amount granted from the credit line is recovered.
3. Revolving credit is characterized by flexibility in its return
Revolving credits differ fundamentally from one of the usual alternatives, the 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 borrowed amount in a much more flexible, or repay the debt in advance if we prefer.
4. There are so-called revolving cards
In addition to the credits themselves, some banks offer revolving credit cards, the characteristics of which can be summarized as purchases or cash withdrawals made with them are deferred until the following month, so you can enjoy liquidity even if no money is available in the bank at that time. Therefore, its operation is very similar to the one of the credit cards of all the life: the limit of the credit card is reduced with the different purchases that are made to its position and it is restored with the payments that are realized monthly.
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 conditions contracted (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 minimum and maximum that will be established according to the conditions of the card that have been subscribed with the bank; The usual limits range between 3% and 25%.
5. Knowing our financial situation is key to proper management
As happens when we request any other type of financing, knowing our financial situation is essential to be able to make a good management of this type of loans. Thus, given that interest tends to rise the longer the repayment term is, establishing a monthly budget that allows us to manage our personal finances and allocating the highest possible percentage to the loan will allow us to save a figure that is not negligible in interest. However, its flexibility can also play very much in our favor if we face a particularly hard month economically speaking, so we can adapt the quota to our circumstances at all times. It is also essential that we be realistic and do not resort to credit by system, but use it as an option that can make our lives easier at any given time.
On the other hand, in addition to acting with a head when it comes to managing our finances, it is crucial that, if we opt for a loan of these characteristics, we trust entities that respect the principles of responsible lending or responsible lending, as is the case with Credit These principles can be summed up in three: ethics, transparency and responsibility.