Which of the following best describes credit?

The best description of credit is a contractual agreement where repayment with interest is expected. This definition captures the fundamental nature of credit, which involves borrowing money or accessing goods and services with the understanding that the borrower will return the amount lent, along with any agreed-upon interest, over a specified period. This repayment structure is central to how credit operates and why it is essential in personal and business finance.

Credit encompasses various financial products such as loans, credit cards, and mortgages, all of which involve a lender providing funds or services to a borrower with the expectation of repayment. Understanding credit's nature is crucial for individuals and businesses, as it impacts financial health, planning, and decision-making.