What a revolving loan is
A revolving loan lets you redraw what you have repaid, up to a limit. It is convenient and it has no natural end — which makes it useful for fluctuating needs and a long-term cost for anyone who treats it as a one-off loan.
The mechanism: repay some of the balance and it becomes available to draw again. Interest is charged on what is outstanding, so a balance that stays high costs continuously.
It suits genuinely variable needs — seasonal income, a business with uneven cash flow — where a fixed loan would be the wrong shape.
It does not suit a one-off cost. Without a schedule forcing the balance to zero, the redraw facility is used, and a loan that should have ended in six months runs for years.
If you have one, set your own end date and treat the instalment as fixed. The discipline a term loan imposes has to be supplied by you here.
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Page last checked 10 August 2026. Statutory caps and lender terms change — confirm anything you intend to rely on with the provider or the National Credit Regulator. Found something wrong? Tell us and we will correct it.