Open-End Credit

AAA

DEFINITION of 'Open-End Credit'

A pre-approved loan between a financial institution and borrower that may be used repeatedly up to a certain limit and can subsequently be paid back prior to payments coming due. The pre-approved amount will be set out in the agreement between the lender and the borrower.

Open-end credit is also refered to as a "line of credit" or "revolving line of credit".

INVESTOPEDIA EXPLAINS 'Open-End Credit'

Open-end credit agreements are advantageous to borrowers, as they exert more control over how much they borrow and when. In addition, interest is not usually charged on the part of the line of credit that is not used, which can lead to interest savings for the borrower.

RELATED TERMS
  1. Remittance Letter

    A document sent by a customer, which is often a financial institution ...
  2. Credit Netting

    A system whereby the number of credit checks on financial transactions ...
  3. Triggering Term

    A word or phrase that when used in advertising literature requires ...
  4. Closed-End Credit

    A loan or extension of credit in which the proceeds are dispersed ...
  5. Commercial Credit

    A pre-approved amount of money issued by a bank to a company ...
  6. Credit

    1. A contractual agreement in which a borrower receives something ...
RELATED FAQS
  1. How would a standby letter of credit be used during an export transaction?

    A standby letter of credit is typically used to provide a bank guarantee of payment for an exporter in the event that an ... Read Full Answer >>
  2. What are some reasons banks deny applications for checking accounts?

    Consumers and businesses use credit to finance major purchases or emergency expenses that exceed regular cash flow. Credit ... Read Full Answer >>
  3. What is the relationship between national interest rates and the amount of revolving ...

    National interest rates and the amount of revolving credit issued have a negative relationship. Interest rates rise due to ... Read Full Answer >>
  4. Is the prime rate in the US different from the federal funds rate?

    Although the prime rate and the federal funds rate are closely tied to one another, their base rates differ based on market ... Read Full Answer >>
  5. Do creditors have the same rights in all 50 US states?

    While the rights of creditors - individuals or businesses who are owed a debt - are federally protected, some states do offer ... Read Full Answer >>
  6. What is the difference between a drawdown in banking and a drawdown in trading?

    The term "drawdown" appears in both the banking world and in the arena of trading, but it has completely different meanings ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Home-Equity Loans: What You Need To Know

    We shed light on why consumers decide to use this form of debt and whether it is a good alternative.
  2. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  3. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  4. Entrepreneurship

    Funding A Startup When Bank Loans Aren't Possible

    There are alternative ways to fund your business start-up when it is not possible to secure a bank loan, but consider the costs and risks of each option.
  5. Home & Auto

    Leveraging Leverage For Bigger Profits

    Leverage is like fire. Find out how to use it to heat up your investing without burning your portfolio.
  6. Credit & Loans

    The Basics Of Lines Of Credit

    Lines of credit are potentially useful hybrids of credit cards and normal loans. Learn how a line of credit can help (and hurt) your finances, and how to find the best one to suit your needs. ...
  7. Credit & Loans

    How Line of Credit Works

    A line of credit is an arrangement where a bank offers a maximum loan amount that the borrower can draw upon at any time. The borrower – which can be an individual, business or government ...
  8. Credit & Loans

    Why Making Minimum Payments Gets You Nowhere

    Getting out of debt can be difficult, but paying off a minimum balance each month only makes things worse.
  9. Taxes

    Canada: A New Frontier For Real Estate Investors

    This property market is easy to access and provides profitable opportunities.
  10. Home & Auto

    Additional Streams Of Income For Seniors

    Find out how a reverse mortgage can work in your favor during retirement.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center