Intro to Credit Quiz

What is the main advantage of a secured loan?

• lower interest rates

• require collateral

• have higher interest rates

• have higher risk

What two items could be used as collateral for a secured loan?

• Jewelry and electronics

• Stocks and bonds

• Car and house

• Furniture and appliances

What factors determine the interest rate that will be charged for money borrowed when using credit?

• Credit score, loan amount, and economic conditions

• Loan term, monthly income, and down payment

• Type of loan, location, and borrower's age

• Credit score, loan term, and monthly expenses

What is a cosigner and what considerations should they make before co-signing a loan?

• A person who guarantees the loan repayment if the borrower defaults; they should consider the borrower's trustworthiness and ability to pay.

• A person who borrows money jointly with the main borrower; they should consider the interest rate and loan term.

• A person who provides collateral for the loan; they should consider the loan amount and down payment.

• A person who reviews the loan documents before signing; they should consider the loan purpose and APR.

What is a danger of taking a variable rate loan?

• Monthly payments may fluctuate, making budgeting difficult.

• Fixed interest rates are usually higher than variable rates.

• Variable rates are always higher than fixed rates.

• Variable rate loans have longer terms than fixed rate loans.

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

• Home mortgage

• Auto loan

• Student loan

• Credit card

Why might someone consider choosing a loan with the lowest monthly payment?

• Low payments fit better in their monthly budget

• Low payments indicate a low interest rate

• Low payments eventually lead to lower total interest paid

• Low payments help you pay off your loan more quickly

What is the principal amount in a loan agreement?

• The amount of money borrowed

• The fee charged for borrowing money

• The duration for which the loan is taken

• The total cost of the loan including interest

What does "interest" refer to in the context of a loan?

• The amount of money borrowed

• The fee charged for borrowing money

• The duration for which the loan is taken

• The total cost of the loan including principal

What does "term" typically refer to in the context of a loan?

• The amount of money borrowed

• The fee charged for borrowing money

• The duration for which the loan is taken

• The total cost of the loan including principal