Closed-End Credit

AAA

DEFINITION of 'Closed-End Credit'

A loan or extension of credit in which the proceeds are dispersed in full when the loan closes and must be repaid, including any interest and finance charges, by a specified date. The loan may require periodic principal and interest payments, or may require the entire payment of principal at maturity.

INVESTOPEDIA EXPLAINS 'Closed-End Credit'

In this type of loan or credit arrangement, the full amount owed must be paid back by the borrower by a set point in time. Most real estate and auto loans are closed-end credit, while credit cards and home-equity lines of credit are open-end or revolving lines of credit.

RELATED TERMS
  1. Amortization

    1. The paying off of debt in regular installments over a period ...
  2. Compound Interest

    Interest calculated on the initial principal and also on the ...
  3. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  4. Tandem Loan

    Two loans taken out on one asset, which is usually a house; the ...
  5. Credit Card

    A card issued by a financial company giving the holder an option ...
  6. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
RELATED FAQS
  1. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  2. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  3. What are the typical requirements to qualify for closed end credit?

    Typical requirements for a consumer to qualify for closed-end credit include satisfactory income level and credit history, ... Read Full Answer >>
  4. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  5. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  6. What is the best way to start to rebuild your credit after a bankruptcy?

    Bankruptcies can be devastating to your credit score. Even worse, a bankruptcy will be listed on your credit report for between ... Read Full Answer >>
Related Articles
  1. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  2. Economics

    How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.
  3. Retirement

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.
  4. Options & Futures

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  5. Home & Auto

    When (And When Not) To Refinance Your Mortgage

    There are both good and bad reasons to refinance. Learn more about both here.
  6. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  7. Fundamental Analysis

    American Express Returns Vs. DJ Industrial Average

    American Express has handily outperformed the Dow Jones Industrial Average since 2009, but unusual weakness in the last year is taking its toll.
  8. Credit & Loans

    Credit Card Review: Platinum American Express

    Take a closer look at the gold standard of luxury travel rewards credit cards, the American Express Platinum, and find out what makes it so unique.
  9. Credit & Loans

    Credit Card Review: Citi Simplicity

    Understand how the Citi Simplicity credit card works, what its pros and cons are, and which kinds of consumers would be happiest with this card.
  10. Credit & Loans

    Credit Card Review: Discover it Miles

    Understand what makes a credit card valuable and possible drawbacks; learn about the Discover it Miles card and how it may benefit a consumer.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!