Chapter 4, Problem 3AA

To determine

To analyze the option best suited for the blank.

Explanation of Solution

An installment debt is a loan that is repaid by the creditor on a regular basis. It is usually repaid in equal monthly installments, plus interest and a percentage of the principal.

The term loan represents the type of financing facility in which an amount of funding is lent to the next party in return for a future return of the value or principal amount. In certain situations, the creditor often applies interest and/or loan costs to the principal amount that the borrower must return in addition to the principal amount. Loans may be for a fixed, one-time sum, or may be available as an open-ended credit facility up to a specified cap.

Installment debt allows consumers to repay a loan over a period of time.