What characterizes closed-end credit?

Closed-end credit is characterized as credit that is issued as a one-time loan, which borrowers must repay over a predetermined period, typically through equal monthly payments. This type of credit arrangement is common in loans such as personal loans, auto loans, and mortgages. The fixed-term repayment structure provides clarity on how much needs to be paid each month, making it easier for borrowers to budget their finances and plan for the future.

The nature of closed-end credit means that once the loan is paid off, the credit is no longer available unless the borrower applies for a new loan and goes through the approval process again. This distinguishes it from open-end credit, such as credit cards, which allows for ongoing borrowing up to a certain limit and provides flexibility regarding repayment amounts.