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?

-Diego is correct because the loan has to be paid in full by a specific date.
-Sienna is correct because she had to pledge collateral to get the loan.
-Sienna is correct because the amount can be borrowed again after she repays the loan
-Diego is correct because the loan is a line of credit.

Answer 1

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

Step-by-step explanation:

Answer 2

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

Step-by-step explanation:

Closed-end-credit is a type of credit where a fixed amount is borrowed and must be repaid in full by the end of a specified period. The amounts to be paid back are the principal and the interests. Sienna took a closed-end-credit because her loan was issued at a go, and she had to repay after 48 months.

Open-end credit is like a revolving fund. The borrower is allowed credit up to a specific limit. Once they make repayments, they can re-access the facility.