Unit 4 Types of Credit Review

The amount you owe as the cost to borrowing money

• Lease

• Loan

• Collateral

• Interest

Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?

• All 3 cards are completely the same

• Debit cards and prepaid debit cards are the same

• Debit cards and credit cards are the same

• All 3 cards are completely different

The average APR for a payday loan is closest to …

• 40%

• 400%

• 14%

• 4%

Which of the following statements comparing credit and debit cards is TRUE?

• Credit card companies provide you with a monthly statement, while debit cards do not

• With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later

• Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard

• Far more businesses accept credit cards than debit cards

The smallest amount of a credit card bill that a credit card holder must pay during a billing cycle to remain in good standing with the lender

• Minimum Payment

• Overdraft Protection

• Peer-to-Peer Lending

• Annual Fee

Which of the following is most likely to represent a fixed rate, secured debt?

• An auto loan

• A credit card

• A prepaid debit card

• A student loan

Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?

• Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash

• The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan

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

• Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount

If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?

• Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control

• Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help

• Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms

• Explore whether a free or non-profit credit counseling service could help

Long term failure to repay a loan according to the terms agreed to, which has a substantial negative impact on the borrower's credit score

• Default

• Grace Period

• Late Payment Fee

• Revolving Credit

Which of the following is true about fixed and adjustable-rate mortgages?

• Fixed-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

• Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

• The two mortgages work the same way but are called different names depending if they come from a bank or a credit union

• Fixed-rate mortgages have a constant payment every month, but an interest rate that increases throughout the term of the loan