What is the difference between open ended and closed ended loans?
Subsequently, one may also ask, what is the difference between open ended and closed ended credit?
Open-End Credit The issuing bank allows the consumer to utilize borrowed funds in exchange for the promise to repay any debt in a timely manner. Unlike closed-end credit, there is no set date when the consumer must repay all of the borrowed sums.
In respect to this, what is an open ended loan?
An open-ended loan is an extension of credit where money can be borrowed when you need it, and paid back on an ongoing basis, such as a credit card. An open-ended loan, such as a credit card account or line of credit, does not have a definite term or end date.
Open-end loans are set for a fixed amount, like the credit limit on a credit card. As a contrast to open-end credit, closed-end loans are taken out for a specific reason, like a car loan or mortgage. For example, if you want to buy a car, the loan can only be used for that car.