How revolving credit home loans work

Let's dive into the world of revolving credit loans. You might have heard the term before, also known as a line of credit or a flexi-loan. These were very popular when interest rates were low, and are a good choice for those who like to have a bit of extra cash available on hand. 

Basically a revolving credit loan is like a giant overdraft. The idea is to help you pay your home off sooner, as your income is paid into your loan account, therefore reducing the balance. Your bills and expenses come out of the account too. This means the more money you have in the account, the more your loan is offset and the less you pay in interest. 

Of course, this works the opposite way too, and you need to be fairly disciplined to have a revolving credit loan, as there is now plenty of money at your disposal (up to your agreed credit limit) and it can be tempting to spend it. A revolving credit loan often doesn’t feel quite as strict as a regular loan, however overspending can cost you dearly in interest. 

Since the interest is accrued daily, it is then added on to your balance at the end of the month. There are no ‘fixed’ repayments with this type of loan and they are only available on a variable or floating interest rate. With the recent increase in interest rates, many with this form of loan may have found their interest to be eating away at their repayments, due to the higher floating rate. 

If you are currently on a revolving credit loan, and are finding managing the repayments a little tougher, there are a few options. 

We can alway look at fixing your loan on to a lower interest rate to help manage the current high rates. This can help take some stress away, and allows you to have a chance to pay some back quicker. 

Alternatively we can also look at adding a decreasing limit to your revolving credit loan. This adds a term to the mortgage, so makes it easier to keep you on track with the repayments.

If you would like any personalised advice around managing your revolving credit loan, or perhaps you are looking to change your current fixed loan over to a revolving credit loan, then we can help. Our team of advisors can work with you to determine what is the best solution for your individual situation and what will save you the most amount of money in line with your goals.