Understanding Types of Loans Reading

1. Why do lenders charge interest? (Choose all that apply)

• Because they are taking a risk by lending money.

• Because the IRS makes them.

• To make money.

• To make it difficult for you to afford the things you want.

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2. Why is comparing loans confusing?

• Because information about loans is not readily available.

• Because you need a college degree to understand them.

• Because there are so many types of loans, fees, interest rates, and term lengths.

• Because banks do not want you to be able to shop around so them make it hard to understand.

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3. Why is a lien sometimes necessary for lenders? (Choose all that apply)

• Because it gives the lender the ability to support the borrower if they are struggling to repay their debt.

• Because the lender needs to lend the borrower more money.

• Because it gives a lender the chance to recoup money when a borrower fails to pay their debt.

• Because a borrower has not made payments on thier loan.

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4. Which is not an example of a Closed-End Loan?

• Mortgages

• Credit Cards

• Car Loans

• Student Loans

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5. ______ is a financial asset.

• Interest

• Collateral

• Principal

• APR

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6. A _________ is a one-time loan for a fixed amount that borrowers make payments toward the balance.

• Credit Card

• Open-End Loan

• Closed-End Loan

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7. A type of loan that doesn't require collateral from borrowers but instead lenders rely on credit reports and credit scores.

• Unsecured Loan

• Secured Loans

• Open-Ended Loan

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8. The price borrowers pay to use a lender's money.

• Interest

• Principal

• Lien

• Collateral

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9. The lender's right to claim the collateral until the loan is paid.

• Interest

• APR

• Loan

• Lien

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10. Choose any that are true about Unsecured Loans:

• The lender can put a lien on the borrower's collateral.

• Borrowers with low credit scores may not qualify.

• Backed by collateral.

• Better credit scores earn better interest rates.

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