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What's the difference between Open-End Credit & Closed-End Credit?

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Question added by Lamya Adam , Front Desk Team Leader , Mariott
Date Posted: 2017/07/13
Anisa Abdulkader
by Anisa Abdulkader , Accountant I , University of Texas

Real estate (mortgage) and auto loans are "closed- end credit", but home-equity lines of credit and credit cards are revolving lines of open-end credit.

Mohammed El Tahir Mohammed Yousif
by Mohammed El Tahir Mohammed Yousif , Finance Manager , Factory of Golden Block Company for Cement Products

Open ended credit is like a credit card. You have a certain amount of credit that you can use, and what you repay depends on how much of the credit you use. As long as you keep making payments, you can keep the credit line open forever - hence open ended. 

 

Closed end refers to loans for a specific amount of money loaned for a specific length of time, with specified repayments. For example a car loan. You borrow set amount of money, and then you repay it. Once you have paid it off, the account is closed. hence closed ended.

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