Loans & Credit

Name 3 types of loans.

Which statement does NOT describe a secured loan?

• The bank that has given you the loan has the right to take your property if you fail to make payments

• Interest rates are generally lower than an unsecured loan

• Interest rates are generally higher than an unsecured loan

• You are expected to pay the entire principle back by the end of the term

Which statement best describes a variable interest rate?

• Because the interest rate can change over the term of the loan you should never consider a loan with a variable rate.

• Because the interest rate can change over the term of the loan it is possible that you would end up paying less than someone with a fixed loan on the same item.

• Variable interest rates do not change over the term of the loan.

• Because the interest rate can change over the term of the loan variable rates are better than fixed rates

Define collateral

• Collateral is an asset or group of assets that are linked to a loan

• Collateral is a finance charge

• Collateral is a down payment

• Collateral is a specific type of home loan

If you are too young to be granted credit yet, you need a loan to purchase an expensive item like a car, what might you do?

• Ask a friend/family member, to co-sign on the loan

• Request your credit history

• Allow someone else to apply for the loan for you

• Open two lines of credit at the same time

What is a down payment?

• The first payment a borrower makes on the principal of a loan

• The interest rate charged on a credit card

• A percentage of the total cost of the asset paid by the borrower in cash before the interest is calculated

• A fee paid to process a loan application

Name the three parts of a loan.

All of the following are benefits of using credit except?

• Convenience

• Helps you to establish a good credit score for future purchases

• Allows you to spend more money than you have

• Can help in emergency situations such as accidents or hospital visits

What is a credit limit

• The maximum amount of money you are allowed to borrow on a credit card

• The highest allowable price for a particular item you would like to purchase on your credit card

• The amount of money you owe when you use your credit card

• A limit on the number of different places in which you can use your credit card

Which is the best financial reason for having a good credit score?

• You get better interest rates

• You can buy more stuff

• You will have bragging rights amongst your friends

• There are not good reasons for having a good credit score