Clean-Up Requirement

AAA

DEFINITION of 'Clean-Up Requirement'

A requirement that is often written into the contracts of annually renewable lines of credit. Clean-up requirements can require the borrower to pay off any outstanding balance on the line of credit and then cease to use the line of credit for a specified period of time. Clean-up requirements are usually implemented as a means of preventing borrowers from using lines of credit as ongoing permanent financing.

BREAKING DOWN 'Clean-Up Requirement'

Clean-up requirements are becoming less common in banks today. Lenders do not see the need to make their customers "clean up" their lines of credit as long as principal and interest payments are received on time. This requirement is also known as "annual clean-up".

RELATED TERMS
  1. Annual Clean-Up

    A banking practice that requires a borrower to pay off all balances ...
  2. Open-End Credit

    A pre-approved loan between a financial institution and borrower ...
  3. Revolving Credit

    A line of credit where the customer pays a commitment fee and ...
  4. Available Credit

    The unused portion of an open line of credit, such as a credit ...
  5. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
  6. Readvanceable Mortgage

    A mortgage feature that allows the borrower to re-borrow the ...
Related Articles
  1. Credit & Loans

    The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.
  2. Insurance

    Your First Checking Account

    This owner's manual will show you what to expect from your bank.
  3. Budgeting

    When Good People Write Bad Checks

    Overdraft protection can help when you overestimate your balance, but it will cost you.
  4. Entrepreneurship

    Small Business Loan Vs Line of Credit: How They Differ

    Understand the differences between a small business loan and a line of credit, and learn some of the most appropriate uses for each form of financing.
  5. Entrepreneurship

    5 Ways to Get Funding For Your Billion-Dollar Idea

    Understand how current billion-dollar companies gone about funding. Learn about five funding strategies to fund a billion dollar idea.
  6. Entrepreneurship

    Funding A Startup When Bank Loans Aren't Possible

    There are alternative ways to fund your business start-up when it is not possible to secure a bank loan, but consider the costs and risks of each option.
  7. Home & Auto

    Leveraging Leverage For Bigger Profits

    Leverage is like fire. Find out how to use it to heat up your investing without burning your portfolio.
  8. Credit & Loans

    The Basics Of Lines Of Credit

    Lines of credit are potentially useful hybrids of credit cards and normal loans. Learn how a line of credit can help (and hurt) your finances, and how to find the best one to suit your needs. ...
  9. Credit & Loans

    How Line of Credit Works

    A line of credit is an arrangement where a bank offers a maximum loan amount that the borrower can draw upon at any time. The borrower – which can be an individual, business or government ...
  10. Credit & Loans

    Why Making Minimum Payments Gets You Nowhere

    Getting out of debt can be difficult, but paying off a minimum balance each month only makes things worse.
RELATED FAQS
  1. How does online banking assist with budgeting?

    Setting up online banking can make a personal budget easier to manage through the use of multiple accounts or expense categories ... Read Full Answer >>
  2. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  3. What are typical forms of long-term debt for a public company?

    Public companies fund their operational needs and capital expenditures with equity or debt. Most often, companies choose ... Read Full Answer >>
  4. What is the difference between subordinated debt and senior debt?

    The difference between subordinated debt and senior debt is the priority in which the debt claims are paid by a firm in bankruptcy ... Read Full Answer >>
  5. How would a standby letter of credit be used during an export transaction?

    A standby letter of credit is typically used to provide a bank guarantee of payment for an exporter in the event that an ... Read Full Answer >>
  6. What are some reasons banks deny applications for checking accounts?

    Consumers and businesses use credit to finance major purchases or emergency expenses that exceed regular cash flow. Credit ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  2. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  3. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  4. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  5. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!