Circular payments are a completely off-chain rebalancing strategy where a node makes a payment to itself across a circular path of chained payment channels.
Step 1: Unbalanced channel
It starts with an unbalanced channel, that needs to be rebalanced in order to continue to route payments.
Step 2: Invoice/Payment
All you have to do is make a payment to yourself in a favorable direction by generating and paying an invoice. This is taken care automatically by your node.
Step 3: Rebalance amount
You will be moving part or all of the local balance to the remote side. For the route to be circular, there should be at least 3 nodes involved.
Rebalance successful!
Your channel is successfully rebalanced and is able to continue to route payments.