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Explain the concepts of closed-end credit and open-end credit. give two examples of each.

Explain the concepts of closed-end credit and open-end credit. give two examples of each.

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Answer #1

Closed-end credit is a Credit agreement between the borrower and the lender in which funds are dispersed in full when loan will be closing and it will be paid with the interest along with the finance charge till a specific predefined date.

Two type of closed end credit loans are Auto loans and Real estate.

Open end credit is a revolving loan which will be a pre approved loan which is granted by the financial institution to the borrower and that can be used repeatedly.

Example of open end credit will be credit cards, overdraft protection on checking accounts.

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