Maura had to get a $350 emergency loan at a very high interest rate to pay for dental work. The lender did not need her credit history. If she does not pay back the loan within three weeks, she will have to pay an extra $50. Raina says the loan is an example of easy-access credit while Maura says it is an example of open-end credit. Which statement about the loan is correct?
Answer
A
Maura is correct because the loan does not have an annual fee.
B
Raina is correct because the loan has a large fee if it is not repaid on time.
C
Maura is correct because the loan has an interest rate.
D
Raina is correct because the loan is a line of credit.
Explanation
Raina is correct: this short-term, high-interest loan that does not require a credit history is an example of easy-access credit. The extra $50 charge if Maura misses the three-week repayment deadline is a large late fee, which supports choice B. Open-end credit is a revolving line of credit that can be borrowed from repeatedly, which this loan is not.
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