adult living- unit 3 test

How do banks make money off of the credit they issue?

• They charge a large, one-time fee at the start of the loan

• They take out a small fee each month from your checking account

• They charge a high interest rate on the loan

• This is a trick question - they DON'T make money!

Which of the following could be a SECURED loan? (hint: choose 2 correct answers)

• Auto loan

• Student loan

• Mortgage

• Overdraft

If the collateral for your secured loan can be taken away, why get a secured loan at all?

• Because they usually have a higher interest rate

• Because they usually have a lower interest rate

• Banks give you an extra 90 days to make a missed payment

• Banks typically don't charge interest for the first 12 months

True or False: A cosigner's credit history can be affected by the loan they are cosigned on.

• True

• False

What information on a Schumer Box should you focus on when choosing a credit card? (hint: choose 3 correct answers)

• The term of the credit card

• Annual Percentage Rate (APR)

• Grace Period

• Fees

How do you avoid paying interest on your credit card (or any other loan for that matter)?

• Always make the minimum payment over time

• Pay interest 1st, then pay what you can on leftover balance

• Always make the full payment on time

• Pay the principal 1st, then pay what you can on interest

Which is TRUE when you make only the minimum payment each month?

• You ar charged interest on the remaining balance

• Your credit line is restored to its maximum amount

• Credit card companies have permission to sell your information

• It is the fastest way to pay off your debt

A shorter auto loan term means ____ monthly payments & ____ total interest you'll pay.

• higher, less

• lower, more

• higher, more

• lower, less

How are credit cards and debit cards different?

• They're both linked to a checking account in different ways

• Some debit cards say VISA on them; credit cards don't

• With a credit card, you are borrowing from yourself

• A credit card can offer perks such as purchase protection

A key difference between saving and investing is

• Saving is for everyone, investing is for the wealthy

• Your money is insured when investing, it is not in savings

• Investing has a guaranteed return, savings does not

• Saving is for emergencies & goals, investing is for long-term wealth