Unlike an installment loan, where a lender and borrower agree on a set schedule of equal payments to repay a fixed amount borrowed, a revolving credit agreement (RCA) allows a borrower to borrow and repay up to a set amount without a fixed repayment schedule. Similar to a credit card, a revolving credit facility, often provided by a bank, agrees to lend the borrower money up to a maximum amount. The borrower can draw down any amount, up to the limit, and repay all or part of it at any time. The revolving credit facility may charge a commitment fee for the use of the funds, and the interest rate for each individual loan may fluctuate.
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