What is an Evergreen Loan?

An evergreen loan is a revolving line of credit that does not require the borrower to pay down the outstanding balance at any point prior to the maturity date of the loan. Evergreen loans are especially useful for borrowers that do not have the financial resources to pay down loan balances on a regular basis. They are more risky for the lender, who must wait until the maturity date to receive a paydown. Given the increased riskiness of these loans, they usually have a higher interest rate associated with them. Examples of evergreen loans are checking account overdraft arrangements and credit cards.

Evergreen Loan Statements

When a lender and borrower enter into an evergreen loan arrangement, the lender sends the borrower a monthly statement of loan activity, along with a payment remittance form on which is stated the minimum monthly payment needed to keep the account current. If the borrower does not pay this minimum amount, then the lender has the option to close down the lending arrangement.