Closed ended loans are those loans that once they are paid off the loan ends. Closed ended loans are the most common type of loan and often used for purchase of a home, car, or other big ticket item. A closed end loan may be secured or non secured and it can be in a small amount or huge sum.
With these types of loans, you get the full amount of the loan when the loan is granted and then the amount of the loan gradually decreases as you pay off the loan. Once the loan is paid off if you need to borrow money again you will need to apply for a new loan and go through the entire loan possess again.
How long a time a closed end loan is for will depend on the cost of what you are purchasing and the terms of the loan. Obviously, a $3000 dollar loan to purchase a used car for your son or daughter is going to have a shorter payback time than that $100,000 home mortgage will have. Of course, the longer you pay on a loan the more interest you pay so you are going to want to make extra payments on those long-term loans as often as possible.
Like all loans, a closed ended loan should only be applied for and used when it is absolutely necessary. If at all possible try to save at least some of them money that is needed to purchase that big-ticket item before asking for a loan. The smaller the loan amount you get, the less interest you will have to pay and the more money you will save in the long run. When applying for a closed ended loan, if interest rates are low try to get a fixed interest rate on your loan so that you know that that interest rate is not going to be climbing over the life of the loan.