Revolving Loans
- Loans where the creditor determines in advance a maximum dollar amount of credit which they are willing to lend an applicant.
- This type of loan requires the debtor to make minimum monthly payments and to keep the balance on the loan within the preauthorized credit limit.
- The interest rate on these loans can be fixed or variable.
- Revolving loans are generally unsecured
Variable rate loans must be tied to an index that determines
when the rate will increase or decrease. While these loans do not have a set
payment amount or length of term, a formula for determining payments and interest
must be included in the loan documents. These formulas can be based on a percentage
of the balance, a percentage of the amount of the most recent advance, a formula
that ensures the account is paid within a set number of months from the most
recent advance or any formula that is mutually agreeable and not proscribed
by law.
These would include lines of credit (secured or unsecured), credit cards,
and store cards.
This is a complicated area of law and an attorney should be consulted on all matters relating to bankruptcy. The information on this website is provided with the understanding that the authors and publishers are not herein engaged in rendering bankruptcy, legal, insolvency, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional bankruptcy, insolvency, tax, legal or other competent advisors. While we have made every attempt to ensure that the information contained in this website has been obtained from reliable sources, Credit Advisors Foundation and Arbor Investment are not responsible for any errors or omissions, or for the results obtained from the use of this information.