Borrowing Money

How can someone establish good credit?

• By opening a checking account.
• By buying an expensive item on credit.
• By avoiding credit altogether.
• By not paying bills on time.

What is collateral?

• A credit score.
• A type of loan.
• Property that will be taken if repayment is not made.
• A type of interest rate.

What is the cost of credit?

• The total amount of money borrowed.
• The interest charged on a loan per year.
• The amount of money a borrower can receive.
• The amount of time a borrower has to repay a loan.

What is the difference between simple interest and add-on interest?

• Simple interest is charged on the face amount of the loan, while add-on interest is charged on the principal and interest combined.
• Simple interest is charged on the principal and interest combined, while add-on interest is charged on the face amount of the loan.
• Simple interest is charged on the outstanding balance, while add-on interest is charged on the full amount of the loan.
• Simple interest is charged on the full amount of the loan, while add-on interest is charged on the outstanding balance.

What is add-on interest?

• Interest charged on the principal and interest combined.
• Interest charged on the face amount of the loan at the time it is made.
• Interest charged on the outstanding balance for the number of days the money is used.
• Interest charged on the full amount of the loan for the entire loan period.

What is the annual percentage rate (APR)?

• The amount of time a borrower has to repay a loan.
• The total cost of a loan.
• The interest charge on a loan per year.
• The amount of money a borrower can receive.

What is the main focus of the lesson referenced in the reading?

• Establishing credit
• Calculating the cost of credit
• Understanding good characteristics of a lender
• Discussing what a lender looks for in a borrower

What are good characteristics of a lender?

• A lender with a large number of branches.
• A lender with low interest rates.
• A lender with convenient business hours.
• A lender with a good reputation in the community.

What is a borrower's capacity to repay a loan?

• The amount of money a borrower has in their savings account.
• The amount of income a borrower has to cover monthly financial obligations.
• The overall economic position of a borrower.
• The amount of debt a borrower has.

What is the charge for interest using the Interest in advance method for a one-year loan of $1,000 at 7% interest?

• $100
• $107
• $70
• $93