A revolving credit agreement establishes the terms of a loan in which a borrower is given a loan or credit that does not have a fixed number of payments.
- Offering a line of credit to a friend or business client
- Requesting a line of credit from a lender or business that you frequent.
Revolving credit agreements involve loans that do not have a fixed number or schedule of payments. Rather, the borrower is allowed a certain amount of credit and he or she can pay it off over time. Most commercial credit cards are issued on a revolving credit basis, and individuals are able to carry debt on these accounts for as long as they need to before paying it off. Interest rates and fees are a common component of revolving credit agreements. Lenders may charge fees for use of the credit, certain transactions carried out on the account, and for failure to meet certain terms of the revolving credit agreement. Revolving credit agreements should also include provisions regarding penalties for default and conditions upon which either party can terminate the agreement. Many states impose limits on the amount of interest that a revolving credit lender can charge, so before entering into a revolving credit agreement be sure to understand the rules in your jurisdiction. Revolving credit agreements are usually much simpler than more complex debt transactions, such as mortgages or other secured loans. Small businesses and service providers can use revolving credit agreements to provide store credit or customer accounts. Use this interactive form if you are considering establishing a revolving credit line for your business.