Types of Credit Final Quiz

The details of any loan will include the following 3 components:

• The principal, the interest rate, and the loan term
• The money you pay, the money the lender pays, and the principal
• The mortgage, the auto loan, and the small business loan
• The loan amount, the credit card payment, and the statement

Why are secured loans considered less risky to the lender?

• Lenders are allowed to conduct background checks for secured loans
• Lenders can take valuable collateral if you fail to repay your loan
• Lenders give secured loans all the time, so they're more comfortable doing them
• Lenders can check your credit score before giving a secured loan, which they can't do for an unsecured loan

Having a good credit score, making a larger down payment, and finding a cosigner with good credit are all ways to…

• Decrease your principal
• Decrease your interest rate
• Increase your term
• Increase your total payments

Each of these statements describes a variable rate loan EXCEPT...

• Typically starts with a lower interest rate than a fixed rate loan
• Is riskier to the borrower because the interest rate could increase substantially
• Is almost always a better option
• Can increase or decrease the interest rate over the course of the loan

Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?

• All 3 cards are completely different
• Debit cards and prepaid debit cards are the same
• Debit cards and credit cards are the same
• All 3 cards are completely the same

The average APR for a payday loan is closest to …

• 4%
• 14%
• 40%
• 400%

Which of the following statements comparing credit and debit cards is TRUE?

• Far more businesses accept credit cards than debit cards
• Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard
• Credit card companies provide you with a monthly statement, while debit cards do not
• With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later

What is an advantage of using a credit card?

• It will not affect your credit score or credit history
• Since it is tied directly to your checking account, it prevents you from spending money you do not have
• If you need to carry a balance, the interest rates are generally quite low (less than 5%)
• You can make an emergency purchase that you otherwise don’t have the money to pay for right now

Credit card disclosure: "Your due date is at least 25 days after the end of the billing cycle. We will not charge you interest on new purchases provided that you have paid your previous balance in full by the due date each month." Identify the true statement.

• If you make the minimum payment on your card within the 25 day period, the credit card company will not charge you interest
• If you pay your previous balance in full after the due date, the credit card company will not charge you interest
• 25 days is an exceptionally long period without paying a credit card bill
• The 25 days after the end of the billing cycle is referred to as the grace period

A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest.

• higher, less
• higher, more
• lower, less
• lower, more