# Understanding Revolvers in Lending: Definition and How They Function

> **Definition**
>
> A revolver is a borrower, either individual or corporate, who maintains a balance on a revolving credit line and makes monthly payments while accessing funds as needed.

## What Is a Revolver?

A revolver refers to a borrower—either an individual or a company—who carries a balance from month to month via a revolving credit line. Borrowers only have to make minimum monthly payments, which go toward paying interest and reducing principal debt. This is different from a non-revolving loan, which only offers a one-time payout.

Revolvers are often used by businesses and corporations to pay for day-to-day operations, such as payroll. A revolving credit line typically comes with a variable interest rate set by a bank, meaning it can fluctuate with market conditions.

### Key Takeaways

*   A revolver is a borrower that carries a balance month to month using a revolving credit line.  
    
*   Credit cards are the most common form of revolving credit.  
    
*   Revolving credit allows for flexible spending but may come with high interest rates.  
    
*   Revolving credit accounts can be secured or unsecured, like home equity lines of credit or credit cards.  
    
*   Businesses and consumers use revolving credit for flexible access to funds.

## How Revolving Credit Lines Work

The term revolver comes from [revolving credit](https://www.investopedia.com/terms/r/revolvingcredit.asp)_,_ a category of financing or borrowing. A revolver lets an individual consumer or a business open a line of credit through a credit card or line of credit bank account, where the credit issuer offers a specified level of credit over time. Credit issuers tend to profit handsomely from revolvers because the open-ended credit line means companies can use them frequently and keep them in use for extended periods of time. A credit card is the most common form of revolving credit.

## Comparing Revolving and Non-Revolving Debt

Revolving and non-revolving credit lines each have distinct advantages. Revolving financing allows the borrower to maintain an open credit line up to a specified limit. Non-revolving financing involves a loan whereby a one-time payout is issued to the borrower who must, in turn, make fixed payments according to a schedule. Revolver financing doesn't involve fixed payments or [coupon payments](https://www.investopedia.com/terms/c/coupon.asp). Instead, a minimum monthly payment is due based on the balance and interest rate according to the terms of the [credit agreement](https://www.investopedia.com/terms/c/creditagreement.asp).

### $1.28 trillion

The total amount of outstanding revolving debt in the United States as of Aug. 2023, according the Federal Reserve.

Non-revolving credit loans are often obtained both by businesses seeking capital with which to finance new projects, and by consumers looking to buy homes, cars, and other big-ticket items. While the underwriting approval standards are typically the same for both revolving and non-revolving credit, revolving credit lines usually involve a more simplified application process.

The rise of [fintech](https://www.investopedia.com/terms/f/fintech.asp) has increased access to both revolving and non-revolving credit, benefiting underbanked populations. Consumers in the market for non-revolving [loans](https://www.investopedia.com/terms/l/loan.asp) may now choose from independent lenders, such as Lending Club or Prosper.

## Important Factors for Revolving Credit Payments

Low introductory rates and reward benefits make revolving credit appealing to consumers and small businesses. Furthermore, when borrowers make a payment, it reduces their outstanding debt balance and makes more money available for future borrowing. Borrowers can keep their revolving credit lines open indefinitely as long as they remain in good standing.

## Does a Revolving Line of Credit Have a Higher Interest Rate Than Non-Revolving?

Typically, non-revolving forms of credit, such as installment loans, will have lower interest rates than revolving lines of credit.

## What Are Some Examples of Revolving Personal Credit?

Revolving credit accounts are quite common. Some examples include credit cards, personal lines of credit, or home equity lines of credit.

## Are Revolving Credit Accounts Secured or Unsecured?

Revolving credit accounts can be either secured or unsecured. For example, a home equity line of credit is secured by the equity in your home. A credit card, on the other hand, is unsecured.

## Final Thoughts on Revolving Credit

A revolver is a borrower who uses a revolving credit line to keep a balance from month to month. This gives borrowers the flexibility of borrowing as needed, while only paying a fixed minimum payment. Credit cards and personal lines of credit are familiar examples.

Revolving loans are useful for businesses, which often need to take on unexpected debt. But the interest rates are higher than other loans, and the revolving feature means borrowers may take on more debt than they anticipated. Fintech innovations have increased the availability of both revolving and non-revolving loan products, but borrowers should still be cautious with their loans.  

> **Article Sources**
>
> 1.  Board of Governors of the Federal Reserve System. "[Consumer Credit - G.19](https://www.federalreserve.gov/releases/g19/current/)."
>     
> 2.  Metro Community Development. "[What's Best For Your Business? A Revolving or Non-Revolving Line of Credit?](https://metrocommunitydevelopment.com/business-lines-of-credit/)"