True or false? Installment credit allows a person to make additional purchases on an account.

True or false? Installment credit allows a person to make additional purchases on an account.

• A. True
• B. False

Answer: (B)

The statement is false because installment credit is designed for specific purchases that are paid back over time through fixed payments. When a person takes out installment credit, they typically secure a loan for a particular amount to buy something, like a car or a home. Each installment payment is predetermined and includes principal and interest. Once the total amount has been borrowed and has specific terms set for repayment, the borrower cannot make additional purchases using that same installment loan. Instead, they would need to apply for a new loan or type of credit for any additional purchases. This differentiates installment credit from revolving credit, such as credit cards, which allow continuous borrowing up to a limit as long as the account remains in good standing.

The statement is false because installment credit is designed for specific purchases that are paid back over time through fixed payments. When a person takes out installment credit, they typically secure a loan for a particular amount to buy something, like a car or a home. Each installment payment is predetermined and includes principal and interest. Once the total amount has been borrowed and has specific terms set for repayment, the borrower cannot make additional purchases using that same installment loan. Instead, they would need to apply for a new loan or type of credit for any additional purchases. This differentiates installment credit from revolving credit, such as credit cards, which allow continuous borrowing up to a limit as long as the account remains in good standing.