A loan that does not require the principal amount to be paid off within a specified period of time. These loans are usually in the form of a short-term line of credit that is routinely renewed leaving the principal remaining outstanding for a long term. This kind of loan is very beneficial for the banks and other financial institutions.
Credit Card Loans and Overdrafts adhere to such a loan. The Banks or financial institutions are mainly worried about the Minimum Amount that has to be paid by the customer rather than the whole amount. This loan is ideal for the banks as they thrive on the interests and not the principal amount.
Any amount within 50,000 that is borrowed by the customer can be paid off within a year or so, but the banks prefer that the customer takes atleast 2 years to pay it off since the bank gets more interest. Credit Card interests are very peculiar. It generates most of the revenue to the banks and also it is risky. But the banks know that the returns are higher only when the money is put in high risk investment/debt.