Which loan is borrowed from a bank and repaid, with interest, over a period of 0-3 years?

Which loan is borrowed from a bank and repaid, with interest, over a period of 0-3 years?

• A. Hire Purchase
• B. Trade Credit
• C. Short-Term Loan
• D. Long-Term Loan

Answer: (C)

This question tests understanding of a bank loan designed for short-term financing. A short-term loan is money borrowed from a bank and repaid with interest over a period that can be up to three years, making it suitable for managing working capital or cash-flow gaps. Hire purchase is mainly asset financing where you repay to eventually own the asset, and it may involve longer-term repayments and different lenders. Trade credit is credit granted by suppliers, not a bank loan, and is typically renegotiated terms for payment rather than a formal bank loan with a set repayment period. A long-term loan is repaid over more than three years, so it doesn’t fit the 0–3 year window. Therefore, the option that best matches borrowing from a bank and repaying with interest within 0–3 years is the short-term loan.

This question tests understanding of a bank loan designed for short-term financing. A short-term loan is money borrowed from a bank and repaid with interest over a period that can be up to three years, making it suitable for managing working capital or cash-flow gaps. Hire purchase is mainly asset financing where you repay to eventually own the asset, and it may involve longer-term repayments and different lenders. Trade credit is credit granted by suppliers, not a bank loan, and is typically renegotiated terms for payment rather than a formal bank loan with a set repayment period. A long-term loan is repaid over more than three years, so it doesn’t fit the 0–3 year window. Therefore, the option that best matches borrowing from a bank and repaying with interest within 0–3 years is the short-term loan.