how businesses and consumers use evergreen loans
in the credit market borrowers can choose from both revolving and non revolving credit products when seeking to borrow funds revolving credit offers the advantage of an open line of credit that borrowers can draw from over their entire life as long as they remain in good standing with the issuer revolving credit may also offer the advantage of lower monthly payments than non revolving credit with revolving credit issuers provide borrowers with a monthly statement and minimum monthly payment that they must make to keep their account current examples of evergreen loanscredit cards are one of the most common types of evergreen loans credit cards may be issued by a bank and added to a customer s account in addition to a checking account they may also be issued by other companies with which the consumer does not have additional account relationships credit card borrowers must complete a credit application which is based on their credit score and credit profile information is obtained from a credit bureau as a hard inquiry and used by underwriters for making a credit decision if approved a borrower is granted a maximum borrowing limit and issued a credit payment card for making transactions the borrower can make purchases with credit at any time up to the available limit the borrower pays down the card balance each month by making at least the minimum monthly payment which includes principal and interest making a monthly payment increases the available funds the borrower can use an overdraft line of credit is another common evergreen loan product utilized by borrowers and is associated with a borrower s checking account for approval borrowers must complete a credit application that considers their credit profile typically retail borrowers approved for overdraft credit accounts receive a maximum borrowing limit of approximately 1 000 the overdraft line of credit can be used to protect the borrower from overdrafts with funds immediately withdrawn from the line of credit account if insufficient funds are available in a customer s checking account borrowers may also take funds from the account through cash advances to their checking account for other purchases as well similar to a credit card account borrowers will receive monthly statements in regard to their line of credit account the statements provide details on the outstanding balance and the minimum monthly payments borrowers must make the minimum monthly payment to keep the account in good standing 