What is a revolving loan and how can it benefit me?

revolving loan uk

Revolving loans are also commonly referred to as revolving lines of credit and most commonly come in the form of credit cards.

Businesses also commonly make use of revolving loans to ensure that they have adequate access to cash flow and are not left without any liquid assets to run their day-to-day operations. A revolving loan will provide a borrower with access to a set amount of credit that he or she can access and use whenever they deem necessary for the entire period of the agreement.

This means that they can make any number of withdrawals over the agreed period and repay based on an pre-determined minimum or based on how much they use. For instance,  if you have a set credit limit of £500 - you can withdraw the full amount, make £300 worth of repayments and then, still draw out this £300 which was repaid, at any time it is needed. If your agreement covers a 24 month period, there will likely be numerous withdrawals and deposits over the course of the loan term.

Continuous Access to Credit

As already mentioned, revolving lines of credit most commonly occur in the form of credit cards and have numerous benefits which make them particularly attractive. One of the most pressing is that the borrower has continuous access to credit - unlike a personal loan where the loan is paid into the borrowers account and once repaid in full, the agreement is concluded. With this type of credit the borrower can relend over and over again, provided that he or she does not exceed the credit limit. In addition, the sheer knowledge that you have "extra cash" available if anything unexpected comes up will certainly give you added peace of mind.

Access to larger amounts of money

The major benefits of having access to a revolving loan is precisely the same as the benefits offered by credit cards; you can essentially make use of a bigger amount of cash than offered by other quick cash loans like payday loans and, only have to repay the minimum monthly repayment or a percentage of what you have used, plus interest. If you need money again a few weeks down the line, you don't have to go to your bank or credit union to reapply for another loan or ask for an additional loan, you simply take out your card and swipe.

Affordable Lending

A revolving line of credit is usually a much cheaper way to borrow smaller amounts of cash repeatedly over a long period of time. If you have good credit you will be able to access market-leading rates which, pale in comparison to what you would be charged in interest when taking out a personal or payday loan. If you struggle to stick to a budget and often run short on cash, a revolving loan can offer you a very affordable solution to a very frustrating problem. In addition, most revolving lines of credit allow the borrower to pay interest only on the outstanding balance and not on the limit provided.

Minimal Repayments

Another major benefit of revolving credit is that you generally do not have fixed repayments such as the case with personal loans - you can pay very little on your balance in the first two months and then settle over 50% of the debt the next - it's usually up to you to decide how much, or how little, you want to pay and this affords you with the flexibility that no other form of credit can offer. If you have a personal loan - your repayments are fixed and you will have to fit the bill even during a difficult month where money is tight and expenses are higher than usual.

Instant Access to Cash

If you're in the midst of a financial crises and need money quick - you'll likely have to wait days to be granted a regular loan from your bank and this will likely lead you to take out a more expensive loan with an alternative lender. Imagine your car has broken down and you desperately need to have it fixed so that you can continue to commute to and from work or imagine a water pipe bursts in your home and you've had to turn off the water supply to you residence. With a revolving line of credit an emergency can be dealt with swiftly since, you already have the permission to withdraw the agreed amount of money, at any time.


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