Unit 5: Credit Multiple Choice Assessment

Which of the following is a term length?

• $2500

• 36 months

• 1.9%

• monthly cost

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 give secured loans all the time, so they're more comfortable doing them

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

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

• Principal

• Term

• Interest Rate

• APR

Each of the following represents and installment loan EXCEPT ...

• Home mortgage

• Auto Loan

• Student Loan

• Credit Card

1. Which statement is true of both debit AND credit cards?

• 1. Both can trap you in an endless cycle of debt if you’re not careful

• 1. Both allow you to make purchases in a store or online

• 1. Both typically have interest rates between 10-30%

• 1. Both require you to  pay a minimum monthly payment when your bill arrives

3. Which statement best describes a Schumer box?

• 1. The final calculation of how much you owe on your credit card bill each month

• 1. A standardized way of presenting the key terms of your credit card agreement

• 1. A legal document stating that you’re behind on your credit card payments

• 1. The outstanding balance on your credit card once you’ve made your recent payment

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

• 1. You pay only a small amount of interest

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

• 1. You avoid paying any interest and fees

4. Why is it more difficult to get out of debt when only paying the minimum payment?

• 1. Your entire minimum payment goes toward principal and the interest continues to compound

• 1. The majority of your minimum payment is going toward interest and finance charges and only a small amount toward the principal

• 1. Your credit limit always resets, so you have a lot of spending power each month