Clean-Up Requirement

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DEFINITION

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.

INVESTOPEDIA EXPLAINS

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".


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