What is revolving credit?

Revolving credit refers to a flexible line of credit that allows borrowers to access funds up to a certain limit and make repayments according to their cash flow needs. This type of credit differs from installment loans, where borrowers have fixed monthly payments and repayment terms. With revolving credit, such as credit cards or home equity lines of credit, borrowers can withdraw money, pay it back, and then withdraw again, often leading to a fluctuating balance based on the borrower’s spending and repayment behaviors. This flexibility makes it suitable for managing varying expenses, illustrating why the description of a line of credit that fluctuates based on cash flow needs accurately captures the essence of revolving credit.