Explain the difference between a loan, line of credit, and a credit card.

• A. Loan provides a fixed amount repaid over time.
• B. Line of credit offers flexible borrowing up to a limit.
• C. Credit card is revolving short-term credit.
• D. Loan provides a fixed amount repaid over time; line of credit offers flexible borrowing up to a limit; credit card is revolving short-term credit.

Answer: (D)

The key idea is how each borrowing tool is structured and repaid. A loan involves tapping a fixed amount upfront and paying it back in scheduled installments over a set period. A line of credit gives you access to borrowing up to a limit as you need it, with interest charged on what you actually borrow and the ability to reuse once you repay. A credit card provides a revolving pool of short-term credit you can borrow from repeatedly up to the limit, often with the option to carry a balance and pay interest on what’s outstanding. The best answer combines these definitions, capturing that a loan is a fixed amount repaid over time, a line of credit offers flexible borrowing up to a limit, and a credit card is revolving short-term credit.