Which option describes an extension agreement in collections?

Which option describes an extension agreement in collections?

• A. They terminate the lease
• B. They permit extending payment terms to resolve delinquency
• C. They reduce principal
• D. They accelerate the entire balance

Answer: (B)

An extension agreement is a modification that stretches the payment schedule to resolve delinquency. It lets the borrower keep the contract in place while paying over a longer period, with new due dates or revised installments, instead of demanding full payment now. This preserves the relationship and reduces the chance of default by giving temporary relief for cash-flow issues. It does not terminate the lease, it does not forgive principal, and it does not accelerate the balance to be due immediately. By extending terms to manage delinquency, this option is the right description.

An extension agreement is a modification that stretches the payment schedule to resolve delinquency. It lets the borrower keep the contract in place while paying over a longer period, with new due dates or revised installments, instead of demanding full payment now. This preserves the relationship and reduces the chance of default by giving temporary relief for cash-flow issues. It does not terminate the lease, it does not forgive principal, and it does not accelerate the balance to be due immediately. By extending terms to manage delinquency, this option is the right description.