For What Type of Equity Loan Are You Lent a Lump Sum, Which is to Be Paid Within a Certain Period of Time?

For What Type of Equity Loan Are You Lent a Lump Sum, Which is to Be Paid Within a Certain Period of Time?

A. Equity

B. A second mortgage

C. A line of credit

D. An Amortization

The correct answer is: D. An Amortization

Explanation

An amortization refers to the process of paying off a debt, such as a mortgage, with fixed, regular payments over a specific period of time. These payments cover both the principal amount (the initial loan amount) and the interest accrued on the loan. Amortization loans provide borrowers with a lump sum of money, and they are required to repay this amount in regular installments over the loan term.

In Contrast

A. Equity: Equity represents the value of ownership in a property after all debts and obligations are paid off. It is not a type of loan but rather an ownership interest in an asset.

B. A second mortgage: A second mortgage allows homeowners to borrow against the equity they have in their property. However, it may not necessarily be provided as a lump sum, and the repayment terms can vary.

C. A line of credit: A line of credit is a revolving loan that allows borrowers to draw money up to a certain limit, repay it, and then borrow again. It does not involve a lump sum loan that is to be paid within a specific period of time.

Therefore, option D. An amortization is the correct choice for a loan where you are lent a lump sum and are required to pay it back within a certain period of time in regular installments.