Question

A revolving line of credit allows you to use credit and pay it back at your own pac as long as you pay a minimum amount each monthpaying interest on the unpaid balance.

True False

Answer 1

True

What is revolving account?

When it comes to the types of accounts which appear on your credit reports, there are two major categories — installment and revolving.

Installment loans describe types of financing where you borrow a set amount of money from a lender one, single time. The borrowed funds are typically paid back at a fixed amount over a fixed period of time. Examples of installment credit include accounts like your mortgage, auto loans, student loans, and personal loans.

Revolving accounts, on the other hand, allow you to borrow funds over and over again, up to an approved maximum amount. This max amount, known as your credit limit, is set by your lender. However, you decide how much money you will borrow (aka charge) and how much you will pay back each month, aside from any minimum payment requirements.

Revolving credit allows you to borrow money when you’d like, in any amount you’d like, up to a set limit determined by the lender. Revolving accounts typically have minimum monthly payments, though you can pay more when you desire. Common examples include credit cards and home equity lines of credit.