Jul 22, 2022 / Credit

How Does Revolving Credit Work?

Revolving credit makes the financial world go ‘round. It can also keep you from having to run circles in your financial life to apply and reapply for loans. Here is a brief overview of this revolutionary credit concept and some ways it can help you evolve the way you think about borrowing money.

What Is Revolving Credit?

Credit typically falls into one of two categories: revolving and installment credit. With installment credit, you borrow a set amount of money and promise to pay back your loan with fixed payments over a fixed period of time. Think mortgage loans, car loans, and personal loans.

Revolving credit, on the other hand, allows you to borrow money on an ongoing basis. Your lender sets a credit limit and you have to make at least a minimum payment each billing cycle or repayment period. Otherwise, you’re free to decide how much to borrow and when to borrow.

As long as you make regular payments and stay in good standing with your lender, you can continue to borrow money on an ongoing, or revolving basis. Your credit becomes available again and again, every time you make a payment. Common types of revolving credit include credit cards and home equity lines of credit (HELOC).

Benefits of Revolving Credit

Revolving credit has a number of advantages over its installment credit cousin. First, because your money is always available and can be used at a moment’s notice, revolving credit gives you a sense of security and peace of mind that you can cover an unexpected expense.

It also gives you the flexibility to plan out your purchases and repayments. Because you can access as much money as you need at any time, you can repay your revolving line of credit before adding another credit purchase. You use only as much as you need, when you need it. You’re in complete control of your credit.

Revolving credit is also much more customizable than other forms of credit. If you use a HELOC to pay for a home improvement project, for example, you can borrow exact amounts, purchase by individual purchase, rather than taking out a lump sum loan and having to guess how much you’ll need to cover your expenses.

The Advantages of a HELOC

Speaking of home equity lines of credit, a HELOC and the concept of revolving credit are a match made in homeowners’ heaven. A HELOC lets you access money whenever a home expense pops up. You can pay for a broken water heater, faulty furnace, new A/C, or even a home remodel as need or circumstances arise. And when you pay back borrowed money, your funds become available again. It’s like having instant access to cash, with an interest rate that’s usually much lower than a credit card.

In fact, right now, you can open a new HELOC at Utah First and get an intro rate of just 2% for the first six months. Plus, with a Utah First HELOC, you can switch between fixed and variable interest at any time, so you can lock in a monthly payment without having to worry about rising interest rates. It’s a convenient, customizable, and flexible way to tackle those summer to-dos.

To learn more about the advantages of a Utah First HELOC, check out our website, apply online, or chat with one of our helpful HELOC experts today.