Which of the following is defined as the maximum amount that can be loaned to a borrower?

The maximum amount that can be loaned to a borrower is referred to as a credit limit, a concept closely associated with revolving credit. Revolving credit is a type of credit that allows borrowers to access a specific amount of funds repeatedly, up to a predetermined limit, while they are allowed to pay down the loan over time. The borrower can take out money as needed, repay it, and borrow again, making it distinct from other forms of credit which may have fixed amounts or payment schedules.

For instance, credit cards function as revolving credit, where the issuer grants a credit limit that can be used for purchases until the total borrowed reaches that cap. Once the borrower repays part of the credit, they can continue to borrow up to the limit again.

In contrast, installment credit involves a fixed loan amount with set repayment terms, while payday loans are typically small, high-cost loans that are due on the borrower's next payday and often involve strict and high fees. Collateral refers to an asset that a borrower offers to a lender to secure a loan, which is not directly related to how the maximum amount of a loan is determined.