Chapter 4, Problem 4AA

To determine

To analyze the option best suited for the blank.

Explanation of Solution

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. I

n 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.

A person in debt should concentrate on paying off high- interest credit cards first.