Revolving credit: how it works and the legislation
You can request a revolving credit from a lender to fund your account. In fact, it is a reserve of money that you will pay back as you use it. Also called revolving credit, this loan is especially interesting for quick purchases. It is a fairly complex method of financing, with a variable interest rate. So, it is important to know it well before you start.
Revolving credit, kesako?
Revolving credit is a variant of consumer credit. Unlike other types of loan, it is not linked to the purchase of property. Concretely, the borrower requests a cash loan. This will be used as it sees fit.
Today, several banks offer revolving credit. Moreover, supermarkets agree to allow customers to pay for their purchases with revolving credit. Typically, this type of loan is tied to the customers' credit or loyalty card. Its main objective is to facilitate the use of the borrower's cash reserve.
In United States, the law requires that the loan be referred to as revolving credit in all contractual, advertising or commercial documents. This type of loan has its own functioning. The credit institution will provide you with a reserve of money that you can use at any time. From the moment you withdraw money from this reserve, a payment of the installments will be made. In addition, there is the interest rate provided for in the loan contract. Your cash reserve will be replenished during the repayment and you can borrow again.
Revolving credit, free choice for the borrower
The borrower is free to choose the type of consumer credit he wants to take out. French law provides for the possibility of subscribing to a repayable loan when the loan is greater than 1000 US dollars.
When a credit organization offers revolving credit, even in the case of an online loan, the offer must always be accompanied by an information sheet. This has all the characteristics of a revolving credit and a depreciable credit. The operation of the loan and the interest rate should be mentioned in a table. Likewise, for the monthly payments and the capital that the borrower will have to repay. In fact, the bank must offer two hypotheses to the future debtor for the repayment period.
Revolving credit legislation
As part of a revolving credit, the borrower can retract within 14 days. This period starts from the moment he accepts the loan contract. In the event that the 14th day is a weekend or a public holiday, it is postponed to the next working day.
In United States, the amount and maturity of a revolving credit are well regulated. Also, no matter how much you borrow, the term should not be less than US $ 15. A minimum portion of the amount you borrow must also be returned at each maturity. Regarding the repayment period, the law is clear. If you borrow an amount less than or equal to 3,000 US dollars, you must repay it over a period of 36 months. In the event that the sum exceeds 3,000 US dollars, this period is extended to 60 months.
Sometimes the revolving credit is associated with a bank card or a loyalty card. In this case, the words "credit card" must be clearly visible on the front of the card. Furthermore, the advantages of this card cannot be taken away from you.
Finally, note that revolving credit has high interest rates. In general, they are higher than those for amortizing loans. Also, you must inform yourself well before applying for this type of credit.