What distinguishes closed-end credit from open-end credit in terms of repayment?

Closed-end credit is characterized by a fixed repayment schedule and a set duration. This means that when a borrower takes out a closed-end loan, such as a mortgage or auto loan, they receive a specific amount of funds that they must repay over a predetermined period with fixed or variable payments. The total amount borrowed is paid off in equal installments, which often include both principal and interest, until the loan is completely repaid.

This structured repayment model contrasts with open-end credit, like credit cards, where borrowers can continually borrow up to a set limit, make payments, and then borrow again. Open-end credit typically allows for more flexibility in terms of repayment as borrowers can adjust their payment amounts and timing based on their financial situation.

Ultimately, the defining feature of closed-end credit is its predictable repayment terms, which ensure that borrowers know exactly when their debt will be fully paid off, along with what their monthly obligations will specifically be throughout the life of the loan.