5
practice examMultiple Choice

Practice Exam

Question 5 • Economics

Which describes the difference between a personal loan and a credit card?

Answer
A
Credit cards offer lump sums of money, while personal loans set a maximum amount a person can borrow.
B
Personal loans are secured for small purchases, while credit cards are unsecured loans for large amounts.
C
Personal loans offer lump sums of money, while credit cards set a maximum amount a person can borrow.
D
Credit cards are secured loans for large amounts, while personal loans are unsecured for small purchases.

Explanation

A personal loan typically provides a borrower with a lump sum that is repaid over time. A credit card instead gives the borrower a credit limit—the maximum amount they can borrow—and they can use and repay portions of it repeatedly. This matches choice A.

AI-written and checked against the verified answer.

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