Closed-end credit is characterized by which of the following?

Closed-end credit is characterized by which of the following?

• A. It is established as a revolving line of credit.
• B. Loans must be repaid in specified equal payments after borrowing.
• C. There are no repayment terms outlined in the contract.
• D. It allows for flexible payment amounts monthly.

Answer: (B)

Closed-end credit is characterized by the requirement that loans must be repaid in specified equal payments after borrowing. This means that when a borrower takes out a closed-end loan, they receive a lump sum upfront, which they are then obligated to pay back over a set period through regular installments. These payments typically include both principal and interest, providing a clear structure for repayment. In contrast to revolving credit, such as credit cards, closed-end credit does not allow the borrower to borrow repeatedly. Instead, once the loan amount is disbursed and repaid, the account is closed. The fixed nature of the payments and the specific timeline for repayment is a defining feature of closed-end credit, allowing borrowers to plan their budgets accordingly.

Closed-end credit is characterized by the requirement that loans must be repaid in specified equal payments after borrowing. This means that when a borrower takes out a closed-end loan, they receive a lump sum upfront, which they are then obligated to pay back over a set period through regular installments. These payments typically include both principal and interest, providing a clear structure for repayment.

In contrast to revolving credit, such as credit cards, closed-end credit does not allow the borrower to borrow repeatedly. Instead, once the loan amount is disbursed and repaid, the account is closed. The fixed nature of the payments and the specific timeline for repayment is a defining feature of closed-end credit, allowing borrowers to plan their budgets accordingly.