Which type of credit is typically extended to finance a purchase and repaid in fixed installments?

• A. Installment Loan
• B. Closed-End Credit
• C. Service Credit
• D. Layaway Plans

Answer: (A)

When a purchase is financed and paid back in equal, regular payments over a set period, you’re dealing with an installment loan. The defining idea is the fixed installment schedule: each payment covers both principal and interest and the loan is fully paid off by the end of its term. This contrasts with layaway, where you pay upfront without borrowing; service credit, where you pay after receiving services; or a broader closed-end credit option that isn’t specifically tied to fixed periodic payments. The clear match to the situation described is the installment loan, since its purpose is to finance a purchase and require repayment in fixed installments.