Final answer:
The type of loan that would allow an interest rate increase after the first year is an Adjustable rate loan. ARMs often start with lower rates but can increase with inflation, while Fixed rate loans maintain the same rate throughout the loan's life.
Step-by-step explanation:
If a bank offers a credit plan that lists 2% interest for the first year of a loan and this rate may increase in future years due to changing economic conditions, the type of loan that would allow such an increase is most likely a(n) Adjustable rate mortgage or loan. Conversely, a loan with a Fixed rate maintains the same interest rate over the life of the loan, regardless of changes in the market or inflation. Credit limits and down payments are not directly related to interest rate adjustments.
To elaborate, when a borrower chooses an adjustable-rate mortgage (ARM), they often start with a lower interest rate compared to a fixed-rate loan. However, with an ARM, the interest rate is subject to change and can increase if the inflation rate rises. This is because ARMs have built-in inflation adjustments to protect lenders from the real value of the loan payments decreasing due to higher inflation. Therefore, with an ARM, the borrower assumes the risk of potential interest rate increases in the future.