Clean-Up Requirement

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. Cleanup Fund

    An insurance term referring to the final expenses associated ...
  3. Available Credit

    The unused portion of an open line of credit, such as a credit ...
  4. Trade Credit

    An agreement where a customer can purchase goods on account (without ...
  5. Credit Rating

    An assessment of the creditworthiness of a borrower in general ...
  6. Committed Credit Line

    A monetary spending loan balance offered by a financial institution ...
Related Articles
  1. Personal Finance

    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. ...
  2. Markets

    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.
  3. Personal Finance

    Revolving Credit vs. Line of Credit

    Revolving credit and a line of credit are arrangements made between a lending institution and a business or individual.
  4. Investing

    How To Increase Your Appeal To Prospective Lenders

    Making a business eligible for loans/credit cards at the best possible rates requires crafting an excellent credit profile through the smart use of credit.
  5. Investing

    Millennials: Prevent a Bad Credit Score

    Here are five ways to help prevent getting a bad credit score that could affect future loan, credit card or mortgage approvals.
  6. Investing

    Understanding Credit Risk

    Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt.
  7. Investing

    What Do Credit Score Ranges Mean?

    Take a closer look at what credit scores in each range mean for your financial future.
  8. Markets

    What's a Revolving Line of Credit?

    A revolving line of credit is an arrangement made between a company or an individual and a bank to borrow money on a short-term basis.
  9. Personal Finance

    6 Ways To Build Credit Without A Credit Card

    It's definitely possible – if a bit more complicated – to build a credit history without traditional credit cards. Just follow these steps.
  10. Personal Finance

    Use Your Credit Card To Boost Your Credit Score

    Misusing credit cards can blow your credit – but using them well can boost your score. How to grow a history, fix bad credit, make good credit even better.
RELATED FAQS
  1. What are some good alternatives to taking out a line of credit?

    Read more about how opening a line of credit might not be the best answer for you and determine available alternatives if ... Read Answer >>
  2. What is the difference between a loan and a line of credit?

    Learn to differentiate between lines of credit and standard loans, and determine when you are likely to use each method of ... Read Answer >>
  3. How is interest charged on most lines of credit?

    Learn how most financial institutions calculate interest on lines of credit by using the average daily balance method and ... Read Answer >>
  4. What information do lenders need when I apply for a credit limit increase?

    Increase your credit limit by making sure your current credit is paid on time and by paying the largest amount you can afford ... Read Answer >>
  5. What's the difference between a secured line of credit and an unsecured line of credit?

    Discover the differences between a secured line of credit and an unsecured line of credit, and why lenders treat the two ... Read Answer >>
  6. What is the difference between bad credit and no credit?

    The answer to this question will depend on what information (if any) is found on your credit report, such as any bankruptcy ... Read Answer >>
Trading Center