Open-End Credit

Open-end credit is a previously approved loan between one finance company and borrower that can be repaid in advance of the due date and may be used over and over again up to a set limit.

The contract between the lender and the borrower will specify the preapproved sum. A line of credit or a revolving line of credit are other names for open-end credit.

Borrowers benefit from open-ended credit arrangements because they have more flexibility over when and how much they borrow. Additionally, unlike with an installment loan, interest is typically not levied on the portion of the line of credit that is not used, which can result in interest savings for the borrower.

A loan or a credit card are the two most common forms of open-end credit. Due to their flexible access to cash and fast availability when a payment is received, credit cards are the more popular option in the consumer market.