A single-payment loan is advantageous to a borrower only if:
A) the interest rate is more than that on an installment loan offered by commercial banks.
B) funds are expected to be available in the future to repay the loan in a lump sum.
C) the finance charges are calculated using the discount method.
D) the finance charges are calculated using the simple interest method.
E) it has a collateral note.

Question

Quizplus · Accepted Answer

A single-payment loan requires the borrower to repay the entire loan amount, along with accrued interest, in a lump sum on a specific date. This type of loan is advantageous only if the borrower anticipates having funds available in the future to repay the loan in full. If the borrower cannot repay the loan on time, they may face additional fees and penalties or damage to their credit score. Therefore, option B is the best choice as it highlights the importance of having funds available in the future to repay the loan in a lump sum.

A Single-Payment Loan Is Advantageous to a Borrower Only If