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Simple English definitions for legal terms
closed-end loan
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A quick definition of closed-end loan:
A closed-end loan is a type of loan where you borrow money and have to pay it back by a certain date. You get all the money at once to buy something specific, like a house or a car. If you don't pay the loan back on time, the lender can take the thing you bought. This is different from an open-ended loan, like a credit card, where you can borrow money multiple times without a specific date to pay it back.
A more thorough explanation:
A closed-end loan is a type of loan that has a specific date by which the borrower must repay the entire loan amount along with interest. These loans are usually given all at once to help the borrower purchase or achieve a specific thing. If the borrower fails to repay the loan, the lender may gain the right to possess the item that was purchased with the loan.
Unlike open-ended loans, which allow borrowers to borrow multiple times without a specific repayment date, closed-end loans have a fixed repayment date. Examples of closed-end loans include:
- Home mortgage loans
- Car loans
- Appliance loans
For example, if someone wants to buy a car but doesn't have enough money to pay for it upfront, they might take out a closed-end car loan. The lender would give them the entire loan amount at once, and the borrower would have a specific date by which they must repay the loan and interest. If they fail to do so, the lender may repossess the car.