Answer
There are certain points on the basis of which one can differentiate open end installment from the fixed installment loan. These points include Monthly payment, Available credit, and Interest rates.
Work Step by Step
Open end installment loans are those loans in which there is no fixed schedule for paying a fixed amount each period. The kind of loans completely differs from the usual loans such as car loans, and personal loans. It is also referred to as revolving credit.
In fixed installment loans, a set amount which is to be paid is determined at the beginning of the loan. It is also referred to as closed-ended loan. There are different types of installments loan such as a) Mortgage loan b) personal loans c) Auto loans d) Standard loans.
An open-end installment loan can be differentiated from the fixed installment loan on the basis of the following points:
1-Monthly payment- Installment loans are paid in equal monthly installments. However, credit card monthly payments depend upon the unpaid balance at the end of the month.
2-Available credit- The borrowed amount is fixed in an installment loan. And if you want to take more loan then you have to apply for a fresh loan. But, in credit cards, you are provided with a credit limit at the time of opening the account but it could be extended by making continuously on-time payments.
3-Interest Rates- In installments loans fixed interest rates are charged for the life of the loan but in credit card, interest rates can increase due to many reasons such as non-payments, variable interest rates etc.
