Practice Test

Question 14 • CMS 2026-2027 Economics and Personal Finance INITIAL CREDIT

Which describes the difference between a personal loan and a credit card?

Answer

Personal loans offer lump sums of money, while credit cards set a maximum amount a person can borrow.

Personal loans are secured for small purchases, while credit cards are unsecured loans for large amounts.

Credit cards are secured loans for large amounts, while personal loans are unsecured for small purchases.

Credit cards offer lump sums of money, while personal loans set a maximum amount a person can borrow.

Explanation

A personal loan typically provides a borrower with a lump sum that is repaid over time. A credit card instead gives the borrower a credit limit—the maximum amount they can borrow—and they can use and repay portions of it repeatedly. This matches choice A.

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