Question

If a consumer makes monthly payments of $250 to pay off a car loan, what type of credit is she using?

A) Non-Revolving
B) Revolving
C) Short Term
D) Unsecured

Answer 1

A consumer making fixed monthly payments to pay off a car loan is using Non-Revolving credit. This is a loan with a fixed repayment schedule until the debt is fully paid off.

Step-by-step explanation:

If a consumer is making monthly payments of $250 to pay off a car loan, the type of credit being used is Non-Revolving. This type of loan involves borrowing a fixed amount of money and making set payments until the debt is paid off. This differs from revolving credit, where the consumer can continually borrow up to a certain limit as long as the account remains in good standing. Auto loans are typically secured by the vehicle itself, meaning that if the borrower defaults, the lender can repossess the car.

Answer 2

A) Non-Revolving

Step-by-step explanation:

There are two types of payment option, revolving credit and non-revolving credit.

For non-revolving credit, there is a fixed interest rate and fixed monthly payment according to agreement to payoff the loan. The consumers fixed monthly payment in this case is $250. Unlike non-revolving credit, there is no fixed payment amount in revolving credit.