What type of loans typically fall under closed-end credit?

Closed-end credit refers to loans that are borrowed for a specific purpose, typically for a set amount of money, and are to be paid back in regular installments over a predetermined time frame. The key characteristic of closed-end credit is that once the loan proceeds are disbursed, the borrower cannot borrow more from that loan without applying for a new one.

Auto loans are prime examples of closed-end credit because they are specifically taken out to purchase a vehicle. When an individual secures an auto loan, they receive a lump sum to buy the car, and they're required to make fixed monthly payments until the loan is fully paid off. Once the loan is repaid, that credit account is closed and cannot be reused for additional borrowing without going through the entire loan process again.

In contrast, other types of credit, like credit cards or home equity lines of credit, offer revolving credit options where borrowers can borrow, repay, and borrow again up to a certain limit without the need for a new loan application. Student loans also generally have different repayment terms and structures that do not fit the closed-end credit model as closely as auto loans do.