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Revolving Loans

What’s a revolving loan and where do I get one?

Matt Corke
Matt Corke
Updated
Fact checked

What is a revolving loan?

A revolving loan is a form of personal loan that shares some similarities to a credit card. Unlike a personal loan, a revolving loan facility can have an open-ended loan term that allows you to conveniently draw on funds again once you’ve repaid a certain amount. You’ll generally pay a fixed repayment amount each month, and you can access more credit (up to a predetermined limit) once you satisfy certain conditions.

Payday loans are expensive forms of credit and shouldn’t be used to fix long-term financial issues. People should avoid payday loans if it will put their budget under strain, as late fees for payday loans can build up quickly and result in debt.

What’s the difference between a revolving loan and a personal loan?

Unlike a personal loan in which the whole amount is transferred into your account and repaid over an agreed loan term, a revolving loan grants you access to ongoing credit. Usually, once you repay 15% of the original loan amount, you can borrow again without having to reapply.

Another difference between a revolving loan and a personal loan is that a personal loan usually has a fixed term, whereas a revolving loan can be indefinite as long as the minimum repayments are made.

This makes revolving loans potentially useful to have in case of emergencies. However, you can use the funds for anything you choose, including consolidating your debts or making small or large purchases.

Find out more about this type of loan and if it’s right for you in this guide.

Should I apply for a revolving loan or personal loan?

There are a number of key differences between a revolving loan and a personal loan that you should consider before choosing which one is more suitable for your needs. Generally, a revolving loan can be more beneficial for someone looking for continued access to an amount of funds, whereas a personal loan may suit someone intending to make a large purchase or other singular expense.

How does a revolving loan work?

A revolving loan credit facility works much like a credit card, giving you access to a specified credit limit to use at your discretion. The main difference between a credit card and a revolving loan is that the repayments on a revolving loan are generally fixed.

Once you’re approved for a revolving loan, the funds are available for you to use when you need them. You will pay a fixed repayment amount which is worked out at the beginning of the loan, and once you pay a certain amount back, you can borrow up to your original credit limit again.

How to compare revolving loans

If you’re considering a revolving loan, it’s important to compare your options and find the loan that’s right for you. Here are some features to keep in mind when considering the products available:

  • The interest rate. Your interest rate will be personalised based on your credit profile, so you’ll want to compare different interest rates at different banks to find the most competitive.
  • The fees. A revolving loan will generally come with monthly service fees and an initiation fee. The initiation fee will depend on the lender, with some calculating it based on your loan amount and others having a flat-rate fee.
  • Loan amounts. Lenders have different minimum and maximum amounts on offer for revolving loans, so think about how much you’ll need before comparing options.
  • Repayment terms. Revolving loans will generally have a minimum and maximum loan term, with some lenders offering indefinite maximum loan terms as long as the minimum repayments are made. There are both variable and fixed repayment options available depending on the lender.

Things to consider

Benefits

  • Get access to ongoing funds without having to reapply. Unlike a regular personal loan, with a revolving loan you can get access to ongoing credit up to your credit limit without having to reapply, as long as you meet the requirements.
  • Fixed repayment amount. With a revolving loan you’ll generally have a fixed repayment amount worked out when you take out the loan, allowing you to budget ahead.
  • There are flexible terms. You can use the funds how and when you want.

Drawbacks

  • Fees and charges. Be mindful that fees and charges will likely apply, such as an initiation fee and a monthly service fee.
  • Overspending. For some individuals, access to a large amount of credit may cause them to make unnecessary or otherwise unaffordable purchases.
  • Penalties. You should make sure that you read the terms for your loan carefully. You’ll be expected to make your minimum repayments and may be charged penalties if that requirement is not satisfied.

How to apply

The eligibility criteria for a revolving loan will differ between lenders, so make sure to check this carefully before submitting your application. You’ll generally need to be over 18 years of age and a South African citizen.

You’ll also usually be asked to provide the following information:

  • Income. You will have to show proof of an ongoing steady income. Your payslips are usually acceptable, or a bank statement which shows consistent deposits from an employer.
  • Liabilities. You are going to be asked to provide a complete list of your currents debts.
  • Identification. All lenders will need to see a current and valid South African photo ID of the applicant and in most cases, you will be asked to provide a photocopy for their records.
  • Assets. Information regarding your home if you are a homeowner, plus any vehicles you own and any savings and investment accounts in your name.
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