What is meant by "revolving debt"?

Revolving debt refers to a credit arrangement that allows the borrower to borrow, repay, and borrow again up to a certain limit. This type of debt is characterized by its flexible borrowing capacity, which means that the available balance can fluctuate based on the borrower's repayment and spending behaviors. For instance, as a borrower pays down their existing balance, the amount of credit they have available to use again increases, creating a cycle of borrowing and repayment.

This type of financial arrangement is common with credit cards and certain lines of credit, where the borrower is not required to borrow a fixed amount each month and can instead use it as needed, as long as they stay within their designated credit limit. This flexibility allows consumers to manage their finances more dynamically compared to loans that require fixed monthly payments or have set terms.