An Open-end credit is a type of loan, usually in
the form of a credit card, in which one entity loans a lump sum of money to
another entity, and the borrower can segment the loan as he or she sees fit.
The borrower typically can pay back part or all of such a loan before a
repayment period, and there will rarely be any early payment consequences.
The majority of open-end credit loans do not charge borrowers for any money that is not used. As long as the total amount of the loan is not used, the borrower can keep using the money available in the open-end credit.
The majority of open-end credit loans do not charge borrowers for any money that is not used. As long as the total amount of the loan is not used, the borrower can keep using the money available in the open-end credit.
Basically, With an open-end credit agreement, the
lender — usually a bank — approves the borrower for a maximum total loan.
Unlike other loans, in which the borrower has to take the total loan all at
once, this loan is open. This means the borrower is allowed to use only a
portion or the entirety of the loan, whenever he or she wants. Going over the
total loan may result in fees, depending on the lender.
Sometimes, lenders punish borrowers for paying a
loan back early, because this decreases the interest the lender would have made
from the loan. With open-end credit, this is rare. Borrowers usually are
allowed to pay back part or all of the balance before the specific payment
date. This may lower the interest payment placed on the open-end credit, or it
just may be more convenient for borrowers to pay the balance earlier than
necessary.
Continuous or Regular loans often force the
borrower to pay interest on the entire loan, even if it turns out that the
borrower only needed some of the money. This is uncommon with open-end credit.
The borrower usually pays interest, but it normally is only on the amount of
the loan currently being used. By effectively managing credit, the borrower is
able to minimize his or her extra interest payments.
Individuals who have open-end credit normally are
able to continually use the credit, as long as they do not exceed the total
loan’s threshold. Purchases also can be as frequent or as seldom as borrowers
want. If there is no open space on the credit, then borrowers can pay part or
all of the loan to regain spending power.
At the same time, algorithms designed to find suspicious purchasing patterns may make the credit temporarily unavailable if borrowers change their spending habits.
At the same time, algorithms designed to find suspicious purchasing patterns may make the credit temporarily unavailable if borrowers change their spending habits.