At a glance
A revolving line of credit lets you borrow, repay and reuse funds up to an agreed limit without reapplying each time.
You usually only pay interest on what you borrow, but rates can be high and interest is often charged daily at a variable rate.
It offers flexible access to money and could help with unexpected costs, but ongoing access to credit can make overspending easier.
Before applying, check the total cost of your borrowing, make sure the repayments are affordable and check the lender is authorised by the FCA.
What is revolving credit?
Revolving credit is a type of borrowing that lets you use, repay and reuse a set amount of money – up to an agreed limit – without having to reapply each time.
As long as you stay within your credit limit and keep up with your minimum payments, you can dip into the credit whenever you need to.
It’s called ’revolving’ because your available balance goes down as you borrow and back up again as you repay. Interest is typically only charged on what you actually use, not the full credit limit (unlike with a personal loan).
Common examples of revolving credit in the UK include:
Credit cards – probably the most familiar type of revolving credit.
Arranged overdrafts – allow you to borrow money via your current account up to a pre-approved limit.
Lines of credit – a pool of funds you can draw from, repay, then use again as needed (which is what this page focuses on).
Some buy now, pay later (BNPL) schemes – where the account stays open for repeated use.
What is a revolving line of credit?
A revolving line of credit is a pre-approved credit limit set by a lender that you can borrow from, repay and then borrow from again.
You might be offered this form of credit if you’ve been refused a regular loan or have a bad credit score (although eligibility varies between lenders).
Unlike a personal loan, where you receive a lump sum upfront and repay it in fixed monthly instalments, a revolving line of credit gives you ongoing access to funds.
You just transfer money from the pot to your bank account, up to your agreed credit limit.
How does a revolving line of credit work?
If your application is approved, the lender sets your credit limit. From there:
You can withdraw funds up to your limit, whenever you need to.
You pay interest on what you borrow.
Once you’ve repaid what you borrowed, the funds become available again.
How much are interest rates on revolving lines of credit?
With a revolving line of credit, you typically only pay interest on the amount you’ve actually taken, rather than the full limit of your credit.
But interest is charged daily and rates tend to be high. For example, line of credit provider Drafty Flex was charging 0.19% variable per day at the time of publishing.
This means the longer you borrow for, the more interest you’ll pay – and it can build up fast. On the plus side, usually there’s no early repayment fee, so you can overpay or clear the entire balance ahead of your repayment schedule if you like.
But, overall, a revolving line of credit is an expensive way to borrow.
Explore whether you’re eligible for other forms of credit, such as a loan, credit card or interest-free overdraft before resorting to this option. And, as with all forms of credit, only borrow if you’re confident you can pay it back.
The pros and cons of a revolving line of credit
Advantages
Flexibility – you only borrow what you need, when you need it
Interest only charged on what you use – not the full credit limit
Reusable – once repaid, the funds are available to you again, without you having to reapply
Handy for short-term gaps – could help smooth out irregular income or cover unexpected costs
Could help build your credit score – as long as you make regular, on-time repayments
Disadvantages
High interest rates – rates can be higher than a personal loan, particularly if the loan is unsecured (though some buy now, pay later schemes offer interest-free periods)
Variable rates – interest rates are often variable, so your repayments might change over time
Easy to overspend – having ongoing access to funds could tempt you to borrow more than you can comfortably repay
Fees for the facility – some lenders might charge arrangement, renewal or non-usage fees
Risk to your credit score – missed payments or maxing out your limit could affect your credit rating
What to think about before taking on a revolving line of credit
Before you apply, it could help to ask yourself a few questions:
Can I afford the repayments?
MoneyHelper suggests working out a budget before you borrow, to check the payments will fit around your other outgoings.
What’s the total cost?
Look beyond the interest rate. Check the APR, which shows the total cost of borrowing money over a year, including the interest and standard fees you’ll have to pay.
How will I use the money?
A revolving line of credit is generally designed to cover unexpected costs or to support an irregular income.
Is the interest rate fixed or variable?
Variable rates could go up or down, so your monthly payments might not stay the same.
Is the lender FCA-regulated?
It might be less risky borrowing from a lender that's regulated by the Financial Conduct Authority. You can check this on the FCA Register.
How could it affect my credit score?
Applying for a revolving line of credit involves a hard credit check by the lender and will leave a mark on your credit file. How you manage the account afterwards could push your credit score up or down.
Struggling with debt?
If borrowing is starting to feel like a struggle rather than a support, you’re not alone. Free, confidential help is available.
The first step is usually to speak to your lender. It might be able to give you more time, adjust your repayments or point you towards a solution that works better for your circumstances.
You can also get free, independent debt advice from a UK charity or advice service, including:
StepChange Debt Charity – free online debt advice, available 24/7. Call 0800 138 1111.
Citizens Advice – help working out which debts to pay first and what your options are. Call 0800 144 8848 (England) or 0800 702 2020 (Wales).
National Debtline – free phone and webchat debt advice in England and Wales. Call 0808 808 4000.
MoneyHelper – government-backed guidance on borrowing, budgeting and dealing with problem debt.
As well as writing for Churchill and Privilege insurance websites, Karen’s CV includes working with M&S, Debenhams, Tesco, Sainsbury’s and John Lewis. With over 20 years of editorial experience for big household names she leads a talented content team with a focus on simplifying personal finance for everybody.
Ele Clark is an award-winning editor who has held leadership roles at Which? and news-stand publications in London and Dubai. She’s appeared across the press and media, including BBC’s Panorama. With almost 20 years’ experience in personal finance, insurance and consumer journalism, she leads a talented team at Compare the Market, creating insightful, accessible content to help people make informed financial decisions.
Charlie is a senior commercial leader with close to a decade of experience across the UK’s leading personal-finance and comparison platforms. Before joining Compare the Market as Head of Commercial in 2024, he held senior commercial roles at TotallyMoney and MoneySuperMarket Group.
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What our expert says...
“A revolving line of credit can be useful if you need flexible access to funds. Because interest is usually charged daily at a variable rate, it's worth checking the APR to understand the total cost of your borrowing.
“Before applying, it’s a good idea to work out a budget. Then borrow only what you need and check the lender is authorised by the FCA.”