Open-End and Closed-End Lines of Credit
Card companies require that the borrower pay at least a minimum of the total owed amount every month. However, it is expected that they will pay the whole amount eventually.
Home equity lines of credit (HELOCs) are included under open-end lines of credit. The amount of money you are qualified to borrow equals the amount you owe subtracted from a percentage of your home property’s appraised amount, which is usually 70-80%. In order to determine your credit limit, the lender usually considers your capability to repay the loan by examining your credit history, financial obligations, and income.
Several home equity lines of credit set a time span within which you are allowed to borrow, and which is usually 10 years.
Closed-end credit offers a definite amount of money to fulfill a specific need within a specific time. This loan may require interest payments, periodic principal, or the repayment of the whole amount at the end of the loan term.
Examples of closed-end credit include categories like payday loans which include short-term loans and small loans, which are secured against the customer’s next remunerations. This also includes appliance loans, car loans, and real-estate loans.