Open-ended credit is credit that can be used repeatedly.
Example: A credit card
Close-ended credit is credit that has to be paid in full by a certain date
Example: A house loan (mortgage)
The main difference is must repay vs doesn’t need to repay.
Explanation:
Closed-end credit is a payment agreement in which the debtor is expected to repay the tax due plus the interest in a particular number of equivalent arrangements, typically on a monthly basis.
Open-ended loan, credit is provided in anticipation of any payment so that the debtor does not have to repay every period the credit is demanded.
Car and ship loans are prominent examples of closed-end loans. On the other side, open-ended loans, such as credit card payments, can have the amount owed up and down as the creditor takes money against the line of credit.
