Question

Sienna has a car loan with an annual interest rate of 4.8%. She will make the same monthly payment for 48 months, after which the loan will be paid back. Diego says that Sienna’s loan is an example of closed-end credit while Sienna says it is an example of open-end credit. Which statement about the loan is true?

Answer 1

Diego is correct because the loan has to be paid in full by a specific date.

Answer 2

Answer:

The answer is: Diego is correct, this is a closed-end loan.

Explanation:

A closed-end credit has to be repaid in full by a specific date, in this case 48 months.

An open-end credit is a loan that can be borrowed after it is repaid, they are also called revolving credits. If this was a revolving credit, after paying her car loan Sienna would be able to get the same loan again.