Credit profile & Loans and debt Loans Fundamental

An amortization schedule tells us what part of each periodic loan payment goes toward paying back the interest on a loan, and what part goes toward paying back the principal loan amount.

• True

• False

Interest paid on interest is known as amortization.

• True

• False

Match each of the following terms, related to loans and loan payments, with their definitions. i) A loan whose payments are fixed for a pre-determined period of time.

• a) Term

• b) Risk

• c) Principal Balance

• d) Fixed Loan

Match each of the following terms, related to loans and loan payments, with their definitions.

ii) The amount of money borrowed in a loan

• a) Term

• b) Risk

• c) Principal Balance

• d) Fixed Loan

Match each of the following terms, related to loans and loan payments, with their definitions.

iii) The likelihood that an individual may fail to pay borrowed money back.

• a) Term

• b) Risk

• c) Principal Balance

• d) Fixed Loan

Match each of the following terms, related to loans and loan payments, with their definitions.

The fee charged on top of the principal amount.

• a) Principal Balance

• b) Fixed Loan

• c) Interest

• d) Revolving Loan

Match each of the following terms, related to loans and loan payments, with their definitions.

The amount charged on top of the principal amount, expressed as a percentage.

• a) Fixed Loan

• b) Interest

• c) Revolving Loan

• d) Interest Rate

Match each of the following terms, related to loans and loan payments, with their definitions.

A loan that does not have a pre-determined repayment period.

• a) Fixed Loan

• b) Interest

• c) Revolving Loan

• d) Interest Rate

Sophia’s monthly amortization toward her housing loan is $2,500. However, she pays $3,000 every month instead. In this manner, Sophia will be able to pay off the principal on her loan faster than making the required payment.

• a) True

• b) False

An individual who has defaulted on a student loan and maxed out three credit cards would be considered “high-risk” by a lender.

• a) True

• b) False