An open-ended loan is a loan that does not have a definite end date. Examples of open-ended loans include lines of credit and credit cards. The terms of open-ended loans may be based on an individual’s credit score.
- Line of credit: an agreement between financial institution and borrower, whereby the borrower is preapproved to take out funds up to a certain dollar limit. Money that is paid back can be spent again up to this dollar limit. The institution will also require interest payments to be made on the funds drawn. This type of instrument sometimes requires collateral (See secured debt).
- Credit card: an agreement between a financial institution and borrower, whereby the borrower is similarly allowed to borrow funds up to a preapproved dollar limit. The borrowed money must be paid back within a certain time period, otherwise interest accrues.
[Last updated in July of 2020 by the Wex Definitions Team]