Which of the following best describes Installment Purchase Agreements?

• A. Open-Ended Credit
• B. Layaway Plans
• C. Installment Purchase Agreements
• D. Service Credit

Answer: (C)

This item tests how you classify different ways people pay for purchases. An Installment Purchase Agreement is a form of closed-end credit used to buy goods, where you agree to fixed payments over a set period. You typically take possession of the item at the time of purchase, and the debt is fully repaid by the end of the term (often with interest), with a security interest held until payment is complete.

Open-ended credit is revolving and reusable up to a limit (like a credit card), not a fixed-term installment plan. Layaway plans let you pay over time but you don’t take the item home until everything is paid. Service credit is credit extended for services (utilities, phone, etc.), not for purchasing tangible goods.