Loan/Amortization Terms Review

What is amortization?

• The process of paying off a debt through irregular payments that only include interest.

• The process of paying off a debt in a lump sum at the end of a fixed period of time.

• The process of gradually reducing or paying off a debt over a fixed period of time through regular payments that include both principal and interest.

• The process of increasing or adding to a debt over a fixed period of time through regular payments that include both principal and interest.

What is loan repayment?

• The process of borrowing money over a specified period of time with interest.

• The process of receiving borrowed money over a specified period of time with interest.

• The process of repaying borrowed money without interest.

• The process of paying back borrowed money over a specified period of time with interest.

What is principal reduction?

• Increase in the outstanding balance of a loan or debt.

• The process of adding interest to a loan or debt.

• Decrease in the outstanding balance of a loan or debt.

• The act of transferring a loan or debt to another party.

What is loan term?

• The loan term is the interest rate on a loan.

• The loan term is the length of time a borrower has to repay a loan.

• The loan term is the amount of money borrowed.

• The loan term is the credit score required to qualify for a loan.

What is an amortization schedule?

• A calculation that determines the total interest paid on a loan.

• A table that shows the breakdown of each periodic payment made towards a loan.

• A document that outlines the terms and conditions of a loan.

• A form that must be completed to apply for a loan.

How does loan amortization work?

• Loan amortization involves regular payments that gradually reduce the loan balance over time.

• Loan amortization involves increasing the loan balance over time with regular payments.

• Loan amortization involves making one-time lump sum payments to reduce the loan balance.

• Loan amortization involves making irregular payments that do not reduce the loan balance over time.

What factors affect the amortization of a loan?

• credit score, loan purpose, borrower's age, loan origination fee

• loan amount, interest rate, loan term, payment frequency

• employment status, loan collateral, loan officer's recommendation, loan application fee

• borrower's income, loan repayment history, loan processing time, loan closing fee

What is the formula for calculating loan amortization?

• A = P * (r(1+r)^n) / ((1+r)^n + 1)

• A = P * (r(1+r)^n) / ((1+r)^n - 1)

• A = P * (r(1+r)^n) / ((1+r)^n + 1)

• A = P * (r(1+r)^n) / ((1+r)^n + 1)

What is the difference between loan principal and interest?

• The loan principal is the interest charged on the borrowed amount, while the interest is the initial amount borrowed.

• The loan principal is the total amount borrowed, while the interest is the amount paid back over time.

• The loan principal is the additional amount charged for borrowing the money, while the interest is the initial amount borrowed.

• The loan principal is the initial amount borrowed, while the interest is the additional amount charged for borrowing the money.

How does loan term affect the total interest paid?

• A longer loan term results in a lower total interest paid, while a shorter loan term results in a higher total interest paid.

• The loan term does not affect the total interest paid.

• A longer loan term and a shorter loan term result in the same total interest paid.

• A longer loan term results in a higher total interest paid, while a shorter loan term results in a lower total interest paid.