Loan and Credit Quiz

In the process of loan amortization, monthly payments remain ______, while the portion of each payment allocated to interest ______ and the portion allocated to the principal ______ over time.

• Constant, Decreases, Increases

• Variable, Decreases, Decreases

• Variable, Decreases, Increases

• Constant, Increases, Increases

Shira is deliberating between obtaining a debit card, a prepaid debit card, and a credit card. Which statement accurately reflects the situation?

• All 3 cards are entirely distinct.

• Debit cards and prepaid debit cards are indistinguishable.

• Debit cards and credit cards are identical.

• All 3 cards are exactly alike.

Which of the following assertions is TRUE regarding secured loans?

• They typically come with higher interest rates compared to unsecured loans.

• In the event of default, the borrower loses nothing except the down payment.

• If the borrower fails to make payments, the lender can repossess the item.

• They are an excellent option for students loans.

How does an excellent credit score primarily aid in car financing?

• By receiving a substantial down payment

• By negotiating for a fantastic sales price

• By qualifying for a low interest rate

• By having a wide selection of term lengths

Choose the statement below that accurately depicts a characteristic of credit cards.

• You owe a fixed payment every month.

• You need funds deposited into a checking account to use the credit card for purchases.

• They are interest-free.

• Making timely full payments each month is the sole method to avoid interest charges.

Amy and Chuck each purchase a house in the same neighborhood for $250,000. Amy's monthly mortgage payment exceeds Chuck's by $400. Which statement could explain this discrepancy?

• Amy opted for a shorter mortgage term, resulting in higher monthly payments.

• Amy made a larger down payment, consequently increasing her monthly payments.

• Chuck chose a shorter mortgage term, thereby lowering his monthly payments.

• Chuck possesses a lower credit score, leading to reduced interest payments.

Denise borrowed $300 through a payday loan in August. By February of the following year, she managed to repay the loan, but it cost her a total of $750. What scenario is most plausible?

What happens to the monthly payments and total interest paid on a loan with a shorter term length?

• Lower monthly payments, less total interest

• Higher monthly payments, less total interest

• Higher monthly payments, more total interest

• Lower monthly payments, more total interest

Among these credit payback strategies, which would result in the HIGHEST overall cost?

• Paying 20% of your credit card balance every month on time

• Paying off your credit card bill in full every month

• Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

• Making the minimum payment (3% of your credit card balance) every month on time

Why do credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full?

• This allows the cardholder to pay their bill quickly and close the card when they're ready

• This helps cardholders develop financial independence

• This enables the credit card company to make more money

• This is required by federal law for tax purposes