Future Business Leaders of America (FBLA) Business Law Practice Exam

Which of the following terms best describes an arrangement to pay back borrowed sums?

1. Credit

2. Loan

3. Debt

4. Installment

The correct answer is: Debt

The term that best describes an arrangement to pay back borrowed sums is "debt." Debt refers to an obligation that a borrower incurs when they borrow money or resources from a lender, which they are required to repay, typically with interest, over a specified period. This concept encompasses any financial amount that is owed and will be settled in the future. In contrast, other terms may refer to different aspects of the borrowing process. For example, "credit" often relates to the ability of a borrower to obtain goods or services before payment, based on the trust that payment will be made in the future, but it does not specifically define the arrangement itself for repayment. "Loan" is more specific to the amount borrowed but does not inherently describe the repayment obligation that comes with borrowing. "Installment" refers to the method of repayment, generally in fixed amounts over time, but does not capture the overall concept of an obligation created by borrowing. Thus, while all these terms are related to borrowing, "debt" encompasses the essential idea of repayment obligation.