Module 7: The Bottom Line on Borrowing

Which is an example of a secured loan?

• Mortgage

• Credit card

• Personal loan of $2,500

• Layaway

How can a credit card holder avoid paying interest on the balance owed?

• Pay the minimum payment required every month

• Only use a credit card for balance transfers

• Pay the balance in full every month before the due date

• Borrow cash against your credit card, called a cash advance

Which of the following is a characteristic of installment credit?

• Make equal payments on a regular basis until the loan is repaid

• A continuous loan the borrower has to repay with a revolving balance

• Varying credit limits depending upon the loan balance

• Varying interest rates depending on the repayment history

Which of the following is NOT considered an advantage of using a credit card?

• Credit cards are useful for emergencies

• Credit cards eliminate the need for savings

• Credit cards are often required to hold hotel and car reservations

• Credit cards offer protection against fraud

Why are payday loans often difficult for consumers to pay back?

• Consumers are not provided with the due date for the loan

• Payday loans are usually used by people with money problems

• Payday loans have to be repaid in cash

• Consumers have to make payments in installments

You want to buy a new tablet computer from an electronic store. Which would be the least expensive way to finance this purchase?

• Loan from your bank

• Loan from a finance company

• Credit card from an offer received in the mail

• Credit card from the electronic store

How are home loans and auto loans alike?

• They require higher interest payments than credit cards

• The annual percentage rate is charged as compound interest on your balance

• You are required to make payments every 25-30 days because these are service credits

• You risk the loss of these assets if you are unable to pay

What do you call property you own that is worth more than your debts?

• Capital

• Collateral

• Condition

• Capacity

Which of the following laws requires creditors to fully disclose all fees and finance charges associated with credit?

• Fair Credit Reporting Act

• Consumer Credit Protection Act

• Equal Credit Opportunity Act

• Fair Credit Billing Act

What information do creditors submit to credit bureaus?

• Character, capacity, and capital

• FICO score based on payment history

• Checking and savings account balances

• Money owed and payment history