Check-In #13: Understanding Loans

Ramon and Stephen are each considering taking out a $1200 loan so they can buy dirt bikes to enjoy on the weekend. Ramon's bank is offering him a 4.3% interest rate, while Stephen's is offering him a 2.4% interest rate.

Which of the following statements is TRUE.

• If each loan has a term of 3 years, Ramon's monthly payments will be higher

• If they both make $300 payments a month, Ramon will pay off his loan faster

• Both men would likely get a better interest rate if they used a credit card, rather than a personal loan, to make their purchases

• If Ramon applies to Stephen's bank, instead, for his loan, he's guaranteed to get the same 2.4% interest rate that Stephen's been offered

Tags

CCSS.8.F.A.2

CCSS.HSF.IF.C.9

Which of these represents a positive reason to borrow from your own 401(k) rather than a bank?

• The interest you are paying on the loan goes back into your own account, rather than to a bank.

• If you decide you'd rather just keep all the money without paying it back, there's no penalty for that with a 401(k) loan.

• The interest rate on a 401(k) loan will always be lower than the rate on a bank loan, so your monthly payments will always be smaller.

• If you decide to leave your job before your 401(k) loan is completely paid off, your company repays the remainder of the loan on your behalf.

Which choice BEST completes the following sentence: If you don't anticipate needing another loan any time soon, being late with your unsecured loan payments...

• doesn't have any real consequence because there's no tangible item to repossess.

• doesn't have any real consequence because your loan may have a grace period for late payments.

• can have real consequences because your car or home can be repossessed.

• can have real consequences because borrowing money will become much more difficult.

Tags

CCSS.RL.8.1

CCSS.RI.8.1

CCSS.RI.8.8

CCSS.RL.11-12.1

CCSS.RL.9-10.1

Which of the following pieces of information should you expect to provide to a lender on loan applications?

• Your race or ethnicity

• Which elementary school you went to

• How much money you make

• How many friends you have lent money to

Which of the following is a TRUE statement and an advantage of credit cards over personal loans?

• Credit cards typically have higher interest rates than personal loans

• Credit cards sometimes offer free extended warranties on large purchases made with the card

• Credit cards can have variable interest rates, so you know you are getting the best deal

• Credit card rates are typically non-negotiable, unlike personal loans

Choose the option that BEST completes this sentence: Personal loans are called "personal loans" because...

• you apply for them in-person, at your own bank branch or at a competing branch (if they offer better rates).

• you apply for them in-person or online, but whether you are given the loan depends on your personal credit score.

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

• they are given to someone based on their personal familiarity with their banker.

Tags

CCSS.RL.8.1

CCSS.RI.8.2

CCSS.RL.11-12.2

CCSS.RL.7.2

CCSS.RL.9-10.2

Which statement below accurately describes how peer-to-peer lending works?

• Large banks loan money to smaller "peer" banks in their community, so those smaller banks can afford to give people loans.

• Peer-to-peer businesses link investors to personal loan requests. The interest paid by the borrower provides the lender's investment income.

• When an individual needs a loan, they find friends/family willing to lend the money, and the peer-to-peer service arranges the legal aspects.

• Potential borrowers compete in a series of peer-to-peer challenges, and the winners receive loan funding.

Which of the following statements about payday loans is TRUE?

• The average payday loan amount in the US is $1000

• The typical term for a payday loan is 5 years

• Payday loans do not require a credit check, so they are available to borrowers even with bad credit

• Payday loans are easy to repay because the lender takes a small portion of every paycheck until the loan is paid off

Nancy and her friends are talking about personal finance after class. Which friend is confused about personal loans?

• Carla says, "Personal loans are informal loans you take from your family or friends."

• Esther says, "Personal loans are sometimes a good alternative to opening a credit card."

• Adria says, "You can apply for a personal loan to start a business, repair your car, or pay off your credit card debt."

• Lisa says, "You should try to get a personal loan before you ever consider taking out a payday loan."

Tags

CCSS.RL.8.1

CCSS.RI.8.2

CCSS.RL.11-12.2

CCSS.RL.7.2

CCSS.RL.9-10.2

Which statement about Small Business Association (SBA) loans is accurate?

• These loans, which are designed to jump-start brand new companies, only need to be repaid if your business makes money.

• Businesses receive SBA loans directly from the Federal government, which offers them extremely low interest rates.

• SBA loans do not require a credit check, so they're a great option for borrowers with bad credit.

• Because the Federal government is involved in SBA loans, they come with extra paperwork and can take longer to process and fully fund.