An example of closed-end credit is a home loan.
Closed-end credit refers to a type of loan where the borrower receives a specific amount of money upfront and agrees to repay it, along with interest, over a set period of time in regular installments. Once the loan amount is paid off, the credit line is closed, and the borrower cannot borrow additional funds without applying for a new loan.
A home loan, also known as a mortgage, is a classic example of closed-end credit. When you take out a mortgage to buy a home, you receive a lump sum of money from the lender to purchase the property. You then repay the loan over a predetermined period, typically 15 or 30 years, through monthly installments. Once the loan is fully repaid, the mortgage is considered closed, and you own the home outright.