Which term describes credit arrangements that are repaid in a fixed number of payments?

• A. Open-ended credit agreements
• B. Deferred Billing
• C. Closed-ended agreements
• D. Layaway plans

Answer: (C)

This question focuses on how credit is repaid over time. Closed-ended agreements describe installment loans where you receive a lump sum up front and repay it in a fixed number of payments with a set schedule. Each payment covers both principal and interest until the loan is fully repaid. This structure contrasts with open-ended credit, where you have a revolving line of credit with variable borrowing and payment amounts, and the balance can be carried and reused over time.

Deferred Billing means you’re postponing payment for a purchase, often with no fixed repayment term attached to a loan, so it isn’t about a fixed-number repayment plan. Layaway plans involve paying for an item in installments before you actually own it, which isn’t borrowing from a lender in the same way as a loan with a defined payoff schedule.