Question
2. Which type of credit involves a one-time loan that must be repaid by a specific date A) Open-end credit B) Closed-end credit C) Line of credit D) Unsecured credit
Ask by Warren West. in the United States
Feb 03,2025
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Tutor-Verified Answer
Answer
The correct answer is **B) Closed-end credit**.
Solution
The type of credit that involves a one-time loan that must be repaid by a specific date is:
**B) Closed-end credit**
### Explanation:
- **Open-end credit** allows borrowers to access funds repeatedly up to a certain limit (like credit cards).
- **Closed-end credit** is a one-time loan for a specific amount that must be repaid by a certain date (like a car loan or mortgage).
- **Line of credit** is similar to open-end credit, where borrowers can draw funds as needed.
- **Unsecured credit** refers to loans that are not backed by collateral, which can be either open-end or closed-end.
Thus, the correct answer is **B) Closed-end credit**.
Reviewed and approved by the UpStudy tutoring team
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Simplify this solution Beyond the Answer
Closed-end credit is like a financial one-and-done deal! You borrow a specific amount of money, usually for purposes such as a home mortgage or a car loan, and you agree to pay it back, along with interest, by a certain date. It’s great for those who prefer structure in their borrowing! On the other hand, open-end credit, like your trusty credit card, allows you to borrow repeatedly up to a certain limit. Once you pay off your balance, your credit line refreshes, making it perfect for ongoing purchases. Choose wisely according to your borrowing needs!
