Sometimes it is necessary to have a cash reserve. If you have not saved for this, you have a problem. Fortunately, you can solve sudden expenses that you cannot pay yourself with a credit. A revolving credit can offer a solution for this. Revolving credit is a bank term for a consumer credit in which the loan amount can be fully or partially taken up again during the term. Interest is charged on the outstanding balance of the credit. What are the advantages and disadvantages, however?
The most ideal situation for such a credit is when you know that a certain cost is imminent, but you cannot predict how much it will ultimately cost. Consider, for example, the repair of a car, the purchase of a new refrigerator or additional costs for the renovation of your home. A cash reserve is therefore recommended in such situations. A revolving credit is often cheaper than a cash credit (going below zero in your bank account) and can therefore be a good solution in some cases.
When we think about borrowing money, we think about banks. At least that was how it used to be. But in recent years, many lenders have sprung up like mushrooms and the possibilities for borrowing are now endless. There can be quite a difference between all those lenders, so comparing is the message. It is therefore important to find the cheapest provider – that is, with the lowest Annual Cost Percentage. Via the internet you can quickly make comparisons between the credit providers through their websites, and request a free quote using the handy simulator tool. You enter some data, such as what you want to borrow, how old you are, whether you have work and so on and within a few seconds you know where you stand.
Benefits of revolving credit
- you do not have to withdraw the entire amount at once
- you only pay interest on the amount withdrawn
- you can withdraw repaid amounts
- you can always repay the loan in whole or in part without extra costs
Cons of revolving credit
- Because you can easily withdraw money again, many people never repay the credit completely or repay much longer than with a personal loan
- Because the interest rate is variable, the interest rate may rise during the term of the loan
- Due to the possibility of re-taking you, you never know exactly when you will get rid of the loan
A loan can help you make an expense, it is and remains a cost. A small amount to borrow, you may not have to think about that for long. It seems so tempting to do. But don’t let it become a habit. There must be a certain point that, to the extent possible, you can save your own money and use it in an emergency. There are always family situations where that does not work, but where there is a will there is a way and you can achieve something yourself if you do that with full dedication.