Credit / Loan Review

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

• 1. The principal, the interest rate, and the loan term

• 1. The money you pay, the money the lender pays, and the principal

• 1. The mortgage, the auto loan, and the small business loan

• 1. The loan amount, the credit card payment, and the statement

2. Why are secured loans considered less risky to the lender?

• 1. Lenders are allowed to conduct background checks for secured loans

• 1. Lenders can take valuable collateral if you fail to repay your loan

• 1. Lenders give secured loans all the time, so they're more comfortable doing them

• 1. Lenders can check your credit score before giving a secured loan, which they can't do for an unsecured loan

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

• 1. Decrease your principal

• 1. Decrease your interest rate

• 1. Increase your term

• 1. Increase your total payments

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

• 1. Typically starts with a lower interest rate than a fixed rate loan

• 1. Is riskier to the borrower because the interest rate could increase substantially

• 1. Is almost always a better option

• 1. Can increase or decrease the interest rate over the course of the loan

1. Which word represents the total cost of the item you’re purchasing on credit minus any down payment you make upfront?

• 1. Principal

• Term

• Interest rate

• APR

2. Each of the following represents an installment loan EXCEPT…

• 1. Home mortgage

• Credit card

• Student loan

• Auto loan

1. Which best describes how a credit card works?

• 1. The credit card company extends you a line of credit. You then pay a small percentage of the cost of those purchases in one annual payment.

• The credit card company extends you a line of credit. You purchase "stuff"  and the purchase gets directly paid with funds in your checking account.

• The credit card company extends you a line of credit. This is free money that you can use to purchase the "stuff" that you need.

• The credit card company extends you a line of credit. You purchase "stuff" and then have the choice to pay the balance in full or a minimum payment each month.

1. Which best describes how a DEBIT card works?

• 1. The credit card company extends you a line of credit. You then pay a small percentage of the cost of those purchases in one annual payment.

• Your bank issues you this card. You purchase "stuff"  and the purchase gets directly paid with funds in your checking account.

• The credit card company extends you a line of credit. This is free money that you can use to purchase the "stuff" that you need.

• The credit card company extends you a line of credit. You purchase "stuff" and then have the choice to pay the balance in full or a minimum payment each month.

1. Which best describes how a prepaid debit card works?

• 1. The credit card company extends you a line of credit. You then pay a small percentage of the cost of those purchases in one annual payment.

• You purchase "stuff"  and the purchase gets directly paid with funds in you have already put on the card

• The credit card company extends you a line of credit. This is free money that you can use to purchase the "stuff" that you need.

• The credit card company extends you a line of credit. You purchase "stuff" and then have the choice to pay the balance in full or a minimum payment each month.

2. What is the advantage of paying your credit card balance in full each month?

• 1. You will incur only a small "paid in full" fee on your next credit card statement

• You pay only a small amount of interest

• You have less of your credit limit available, therefore, less temptation to spend

• You avoid paying any interest and fees