Revolving Loans vs Personal Loans: Which is right for you?

Not all credit is the same, and some credit facilities are more flexible than others. Whether you need access to a lump sum or access to credit continuously depends on your needs. Here's what you need to know.

What is a revolving loan?

You can use a Revolving Credit Facility for many reasons, from helping bridge financial gaps, to revamping your home or even unexpected car repairs. It's different to a personal loan in a few ways:

• With a Revolving Credit Facility, you get immediate access to the approved amount upfront, and can use the money whenever you need it. You'll also have continuous access to the repaid loan amount as and when you make repayments over time.
• You only pay a monthly fee in months where you use the facility, and you only pay interest on what you've used. This means you can apply for a facility today, but only pay for it in the future when you use it.
• A revolving loan is more flexible as there are no term limits, and your minimum monthly repayments are usually set at a percentage of the outstanding balance.
• Funds can be borrowed again if you keep up with the minimum repayments - there's no need to reapply for credit.
• You can also pay off what you've borrowed at any time to save on interest - either in full, or whatever you can afford over and above the minimum monthly repayments.

With Vitality Money, Discovery Bank's Revolving Credit Facility can help reduce your effective interest rate by up to 7%.

Get your Discovery Bank Revolving Credit Facility in a few taps

You can apply for revolving credit in the Discovery Bank app - it only takes five minutes:

1. Log in to your banking app.
2. Tap More.
3. Tap Credit Facilities.
4. Tap Apply today on the Revolving Credit Facility tile and follow the steps to submit your application.

What is a personal loan?

A personal loan is often used for specific purchases at a specific point in time, like paying for planned renovations, educational expenses, or elective medical procedures. However, the funds can only be accessed once, and:

• With a personal loan, you get access to a lump sum amount upfront. You can't borrow against it again or access funds that you've already repaid back into the loan.
• You pay monthly fees every month that the facility is active until the loan is repaid in full.
• It has a fixed repayment term, for example, 72 months. The term and the interest rate determine your fixed monthly repayments.
• To borrow funds again in the future, you'll need to apply for a new personal loan.
• Although you can settle a personal loan early to save on interest over time, doing so may incur early settlement charges.

A Revolving Credit Facility is an alternative, flexible option to a personal loan. It's useful if you need access to a backup form of financing, with continuous and immediate access to funds, whereas a personal loan - while more predictable with its repayment structures - may be less dynamic in the way you can access and repay it.

When used responsibly, a Revolving Credit Facility is a flexible credit tool that gives you access to funds when you need them.

Discover the future of financial freedom with Discovery Bank's Revolving Credit Facility.

Access, spend and repay - your way.

The Future of Banking. Now.

This article is meant only as information and should not be taken as financial advice. For tailored advice, please contact your financial adviser.