Mortgage loans and automobile loans are examples of closed-end credit. An agreement, or contract, lists the repayment terms, such as the number of payments, the payment amount, and how much the credit will cost.
A closed-end loan is to be contrasted with an open-ended loan where the debtor borrows multiple times without a specified repayment date like with a credit card. Examples of closed-end loans include a home mortgage loan, a car loan, or a loan for appliances.
Credit card accounts, home equity lines of credit (HELOC), and debit cards are all common examples of open-end credit (though some, like the HELOC, have finite payback periods). The issuing bank allows the consumer to utilize borrowed funds in exchange for the promise to repay any debt in a timely manner.
Closed-end credit is a loan or type of credit where the funds are dispersed in full when the loan closes and must be paid back, including interest and finance charges, by a specific date.
Closed-end Credit. A loan where the entire amount is loaned at the beginning and all repayment and interest must be repaid by a specific date. Collateral. Something of value (often a house or a car) pledged by a borrower as security for a loan.
Overdraft Protection, VISA credit cards, Personal Lines of Credit and Home Equity Lines of Credit are examples of Open End Loans. Members must complete a new statement of financial condition every three years to continue to borrow on an Open End Loan.
The three most common types of closed-end credit are installment sales credit, installment cash credit, and single lump-sum credit.
The 3 types of credit are: revolving, installment, and open accounts.
Loans are close-ended credit lines with set payback amounts and term lengths. A student loan of $10,000 with an estimated interest payment of $2,000, for example, would be paid back in 10 years with payments of $100 per month.
A personal loan, by comparison, is closed-end credit that you can use however you like. ... They may require you to have a good credit score to be approved. In some cases, you may have to make a down payment. Your credit score will impact the amount you can borrow and the interest rate you pay.
A mortgage is an example of closed-end credit (T/F). A loan from a family member is an example of an expensive loan (T/F). You just studied 56 terms!
One common type of closed-end credit is: Installment cash credit.
Mortgage loans and automobile loans are examples of closed-end credit. An agreement, or contract, lists the repayment terms, such as the number of payments, the payment amount, and how much the credit will cost.
Open-end credit also is referred to as a line of credit or a revolving line of credit. Open-end loans, like credit cards, are different from closed-end loans, like auto loans, in terms of how the funds are distributed and whether a consumer that has started to pay down the balance can withdraw the funds again.
Service credit is credit extended in the form of services, like utilities. Examples of service credit include heat, electricity, water, phones, and similar services.
An example of this is an auto loan. An open-end loan is a revolving line of credit issued by a lender or financial institution. It comes in two types and has certain characteristics that can benefit the borrower.
Revolving accounts, like credit cards, are referred to as "closed" when the account can no longer be used to make charges. Typically, you notify the lender to close the account when it has a zero balance and you no longer want the credit card. However, a revolving account can be paid in full and still remain open.
Most lenders will be looking for credit scores of about 700 or higher. You can get a boat loan with a lower credit score, but expect that you may have to pay a penalty in the form of a higher interest rate or a larger down-payment.
(Close-end credit) is a credit arrangement in which the borrower must repay the amount owned plus interest in a specific number of equal plans, usually monthly. (Open-ended) credit is extended in advance of any transaction so that the borrower does not need to repay each time credit is desired.
What is true about the payments with closed-end credit? They remain the same until the credit is paid off. Consumer credit has very few advantages and is best avoided at all times.
Pros and Cons of a Closed-end Mortgage
The primary advantage of a closed-end mortgage is its lower interest rate. Lenders will generally offer their very lowest interest rates on closed-end mortgages, and borrowers can be assured that this rate won't change for the duration of the mortgage.
Installment closed-end credit allows the consumer to receive a certain amount of credit to purchase one item or a few goods. One type of installment closed-end credit is a car loan. The car company offers the consumer credit to buy the car. The credit does not extend beyond the sales price of the car.