Revolving and Dropline Credit Lines.

In this section of the manual, you will know what is revolving and dropline credit lines and how does it work.

• What is a Credit Line and how does it work?

A line of credit is a flexible loan from a financial institution that consists of a defined amount of money that you can access as needed. You can repay what you borrow from a line of credit immediately or over time in regular minimum payments.

• How do I qualify for a line of credit?

To qualify for a line of credit, you will have to meet the lender’s standards, which typically include proving your creditworthiness with a minimum credit score, sufficient income, and other factors.

• What is a Revolving Credit?

Revolving credit is a credit line that remains available even as you pay the balance. Borrowers can access credit up to a certain amount and then have ongoing access to that amount of credit. They can repay the balance in full or make regular payments. Each payment, minus the interest and fees charged, opens the credit again to the account holder.

Examples of revolving credit include credit cards, lines of credit, and home equity lines of credit (HELOCs). They work differently than installment loans.

• How does Revolving Credit work?

When a borrower is approved for revolving credit, the bank or financial institution establishes a credit limit that can be used over and over again, all or in part. A credit limit is the maximum amount of money a financial institution is willing to extend to a customer seeking funds.

Revolving credit is generally approved with no date of expiration. The bank will allow the agreement to continue as long as the account remains in good standing. Over time, the bank may raise the credit limit to encourage its most dependable customers to spend more.

Borrowers pay interest monthly on the current balance owed. Because of the convenience and flexibility of revolving credit, a higher interest rate typically is charged on it compared to traditional installment loans Revolving credit can come with variable interest rates that may be adjusted. The costs of revolving credit vary widely.

• What is a Dropline Credit?

Dropline credit is a credit line in which the balance keeps on dropping once a credit limit is established.