Which of the following analogies best illustrates the credit-debt trap?
A)A country must refinance a loan from 10 to 30 years to be able to make payments.
B)A company is paying off a 15-year loan on an investment that will not produce revenues for five years.
C)A family must take on additional jobs to pay back loans needed to provide a home and food.
D)A person is only able to pay some of the interest,and none of the principal,of a large credit card bill.

Question

Quizplus · Accepted Answer

The credit-debt trap is a situation where a person or entity is in a cycle of borrowing money to pay off previous debts, but is unable to pay back the principal and only pays the interest. This is similar to a person who can only make the minimum payment on a credit card bill, which means they are only paying the interest and not making a dent in the actual debt. Option D is the best example of this analogy.

Which of the Following Analogies Best Illustrates the Credit-Debt Trap