Unit 5 Study Guide

Front

What are the two most important factors in calculating your credit score?

Back

Payment history and amounts owed.

Front

Why is it beneficial to pay more than the monthly amount due on an amortized loan?

Back

The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly.

Front

How does a credit score affect monthly payments on a car loan?

Back

A higher credit score typically results in lower monthly payments, while a lower credit score leads to higher payments.

Front

What defines a personal loan?

Back

Personal loans are lent based on your personal credit history rather than secured by an asset like a house or car.

Front

What is the impact of missing a credit card payment?

Back

Missing a credit card payment can negatively impact your credit score.

Front

What is an amortized loan?

Back

An amortized loan is a loan with scheduled payments that cover both principal and interest over a specified period.

Front

What is the significance of payment history in credit scoring?

Back

Payment history accounts for a significant portion of your credit score, reflecting your reliability in repaying debts.

Front

What is the difference between secured and unsecured loans?

Back

Secured loans are backed by collateral, while unsecured loans are not and are based solely on creditworthiness.

Front

What does it mean to negotiate a lower monthly payment with a lender?

Back

Negotiating a lower monthly payment involves discussing terms with your lender to reduce your payment amount, which can help manage debt.

Front

How can extra payments on a loan affect the total interest paid?

Back

Making extra payments reduces the principal balance, which in turn decreases the total interest paid over the life of the loan.