Loan Basics

The details of any loan will include the following 3 components:

• The money you pay, the money the lender pays, and the principal

• The principal, the interest rate, and the loan term

• The mortgage, the auto loan, and the small business loan

• The loan amount, the credit card payment, and the statement

In a loan, what is the "principal?"

• The total amount paid by the end of the loan

• Mr. Ivery

• The amount borrowed

In a loan, what is "interest?"

• The percentage of interest you have in getting a loan

• The rate or percentage a lender charges you to borrow the money

• The total amount to be paid to the lender

The length of time for paying off a loan is called the _________ of the loan.

• term

• timeframe

• paytime

• time period

Why are secured loans considered less risky to the lender?

• Lenders are allowed to conduct background checks for secured loans

• Lenders can check your credit score before giving a secured loan, which they can't do for an unsecured loan

• Lenders give secured loans all the time, so they're more comfortable doing them

• Lenders can take valuable collateral if you fail to repay your loan

Having a good credit score, making a larger down payment, and finding a cosigner with good credit are all ways to…

• Decrease your interest rate

• Increase your term

• Increase your total payments

• Decrease your principal

Each of these statements describes a variable rate loan EXCEPT...

• Typically starts with a lower interest rate than a fixed rate loan

• Is riskier to the borrower because the interest rate could increase substantially

• Is almost always a better option

• Can increase or decrease the interest rate over the course of the loan

What are two examples of collateral (pick 2)

• vacation

• house

• education

• car

What are two factors that go into determining your interest rate? (pick 2)

• Employment History

• How many children you have

• If you got chicken salad at 81st Deli

• Credit Score

Fill in the blank: A _______ is someone other than the borrower who agrees to sign the loan document and repay the loan if the original borrower stops making payments

• cosigner

• collateral

• securer

• loan shark