Who gets the better interest rate?

If you are a borrower, which statement is true?

• You will pay additional money on your loan called interest.

• A lower interest rate is worse for you.

• Your interest rate is determined on your negotiating skills.

• Having a lower credit score gets you a lower interest rate.

What is the amount of money you borrowed called?

• Dividend
• Profit
• Interest
• Principal

The greater your interest rate is, the ​ (a)   you'll pay in interest.

• more
• less

If you are a higher risk for repaying your loan, will you have a higher or lower interest rate?

• Lower
• Higher

Imagine you are the head of a bank and you have two friends, Bob and Alice, applying for loans. Who would you offer a better interest rate to?

• Bob, who has a credit score of 650.

• Alice, who boasts a credit score of 720.

• They both get the same rate, regardless of their credit scores.

Answer explanation

Alice because a higher credit score means you have shown you are better at paying off debt. Better at paying off debt means you are a lower risk.

Aria has been working at the same tech company for ten years, while Liam changes his tech jobs every six months. Their financial situations are otherwise the same. If you were a bank manager, who would you approve a home loan for?

• Aria

• Liam

• Neither

• Emma

Person A wants to borrow for 5 years, and person B wants to borrow for 8 years, who gets the lower interest rate?

• Person B
• They both get the same interest rate
• Person A

Person A and B are both applying for a loan of $10,000. Person A offers up their $5,000 car as collateral. Person B offers $3,500 in their savings account as collateral. Who gets the lower interest rate?

• The interest rate is not determined by collateral
• Person A
• Both get the same interest rate
• Person B

Person A has a credit score of 700 and Person B has a credit score of 600. Who is likely to get a lower interest rate on a loan?

• Person A

• Person B

• Both get the same interest rate

• The interest rate is not determined by credit score

What is the term for the cost of borrowing money, expressed as a yearly percentage of the loan amount?

• Principal

• Interest

• Annual Percentage Rate (APR)

• Dividend