Which of the following is an example of a long-term debt?

Which of the following is an example of a long-term debt?

• A. A student loan
• B. A credit card balance
• C. A car lease
• D. A utility bill

Answer: (A)

A student loan is an example of long-term debt because it is typically structured with a repayment plan that spans several years, often ranging from 10 to 25 years depending on the amount borrowed and the terms of the loan. This type of debt is usually taken out to finance education expenses and is paid back in installments over time, making it a long-term financial commitment. In contrast, other options represent different categories of debt. A credit card balance is often considered revolving debt due to its flexible repayment terms and high interest rates. A car lease is considered a type of short-term obligation, where the vehicle is returned at the end of the lease period, typically within a few years. A utility bill is a recurring expense that is paid monthly and does not accumulate into a long-term debt. Therefore, a student loan stands out as it exemplifies an obligation that is commonly sustained over a prolonged duration.

A student loan is an example of long-term debt because it is typically structured with a repayment plan that spans several years, often ranging from 10 to 25 years depending on the amount borrowed and the terms of the loan. This type of debt is usually taken out to finance education expenses and is paid back in installments over time, making it a long-term financial commitment.

In contrast, other options represent different categories of debt. A credit card balance is often considered revolving debt due to its flexible repayment terms and high interest rates. A car lease is considered a type of short-term obligation, where the vehicle is returned at the end of the lease period, typically within a few years. A utility bill is a recurring expense that is paid monthly and does not accumulate into a long-term debt. Therefore, a student loan stands out as it exemplifies an obligation that is commonly sustained over a prolonged duration.