Openend Loan

Definition of "Open-end loan"


Where the borrower may add to the principal without renegotiating the terms of the loan. Additional sums borrowed under the terms of an open-end loan will have the same rate of interest and life of loan terms as the original loan. Quite frequently a home equity loan is an open-end loan, and the borrower may add to its principal without changing its terms. For example, Brian obtains a $10,000 open-end home equity loan to make some alterations to the house. After beginning the alterations, he realizes additional repairs will also be necessary. Thus, he increases the principal of the home equity loan by an additional $5,000 to make the necessary repairs without changing the terms of the loan.

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