Which of the following is an example of open-ended credit?

• A. HELOC.
• B. Fixed-rate mortgage.
• C. Installment loan.
• D. Payday loan.

Answer: (A)

Open-ended credit, also known as revolving credit, is a line of credit you can borrow from, repay, and borrow against again up to a credit limit without reapplying for a new loan. A home equity line of credit fits this idea because you can draw funds as needed during the draw period, repay what you’ve borrowed, and continue borrowing again up to the limit. This ongoing access to available credit is what makes it open-ended.

The other options illustrate closed-ended credit, which provides a lump sum up front and is repaid in fixed installments or by a single due date. A fixed-rate mortgage is repaid in scheduled payments over a set term; an installment loan is a one-time loan with regular payments until the balance is paid off; a payday loan is a short-term, single-payment loan. Closed-ended products stop after repayment, whereas open-ended credit remains available for future borrowing.