What type of loan gives a borrower a limit up to which they may borrow?

A borrower is provided with a limit on how much they can borrow through an open-end loan, which allows for flexibility in borrowing up to that specified maximum limit. This type of loan is often associated with revolving credit, meaning that the borrower can draw on the loan up to the limit, repay it, and then borrow again, similar to how a credit card functions.

This characteristic makes open-end loans advantageous for borrowers who need ongoing access to funds for varying amounts. Examples of open-end loans include home equity lines of credit (HELOCs) and certain credit lines.

In contrast, close-ended loans provide a set amount of borrowed funds without the ability to borrow again once repaid. Fixed loans have a stable interest rate and payment format, but this does not inherently give the borrower a borrowing limit. Balloon loans typically involve shorter terms and larger final payments, rather than establishing a borrowing limit. Thus, the concept of a borrowing limit aligns directly with the features of an open-end loan.