What is the term for a credit arrangement allowing a consumer to be pre-approved for a line of credit?

The correct term for a credit arrangement that allows a consumer to be pre-approved for a line of credit is revolving debt. This type of credit arrangement gives consumers the flexibility to borrow up to a specified limit, repay the debt, and then borrow again as needed. An example of revolving debt is a credit card, where the consumer has a predetermined credit limit and can borrow, pay off, and borrow again multiple times.

Revolving debt typically involves a minimum payment each month based on the outstanding balance, making it convenient for consumers who need access to funds on an ongoing basis. The pre-approval aspect means that the consumer is evaluated based on creditworthiness before receiving access to the line of credit, allowing for predictable spending and borrowing based on their financial profile.

In contrast, installment debt involves fixed monthly payments for a specified term, secured debt is backed by collateral, and unsecured debt does not have collateral backing it, often resulting in higher interest rates. These distinctions help clarify why revolving debt is the most appropriate term for this type of credit arrangement.