Which of the following is a desirable characteristic when choosing a line of credit?

• A. High annual fees
• B. Limited access to funds
• C. Low interest rate
• D. Strict repayment terms

Answer: (C)

Verified step by step guidance

1. Understand the concept of a line of credit: A line of credit is a flexible loan from a financial institution that allows borrowers to access funds up to a predetermined limit. It is often used for short-term financing needs.
2. Identify desirable characteristics of a line of credit: Desirable characteristics typically include low interest rates, flexible repayment terms, and easy access to funds. These features make borrowing more affordable and convenient.
3. Evaluate the options provided in the problem: Analyze each characteristic mentioned (high annual fees, limited access to funds, low interest rate, strict repayment terms) to determine which aligns with the desirable traits of a line of credit.
4. Focus on the correct answer: Low interest rate is a desirable characteristic because it reduces the cost of borrowing, making the line of credit more financially advantageous for the borrower.
5. Conclude the reasoning: Characteristics such as high annual fees, limited access to funds, and strict repayment terms are undesirable because they increase costs or limit flexibility, which are contrary to the benefits of a good line of credit.