Types of Credit

How do banks make money off of the credit they issue?

• They charge a large, one-time fee at the start of the loan

• They take out a small fee each month from your checking account

• They charge a high interest rate on the loan

• This is a trick question - they DON'T make money!

Which of the following is typically a SECURED loan?

• Auto Loan

• Student loan

• Credit Card Balance

• Overdraft

Tags

CCSS.HSN.RN.B.3

If the collateral for your secured loan can be taken away, why get a secured loan at all?

• Because they usually have a higher interest rate

• Because they usually have a lower interest rate

• Banks give you an extra 90 days to make a missed payment

• Banks typically don't charge interest for the first 12 months

What may NOT impact the interest rate on your loans?

• Your relationship with the financial institution

• Your credit score

• The loan amount

• Your level of education

Tags

CCSS.6.RP.A.3C

True or False: A cosigner's credit history can be affected by the loan they are cosigned on.

• True

• False

Why does the amount of INTEREST you owe on a loan decrease over time?

• The institution trusts you more, so they lower the interest

• With each payment, principal increases; so interest lowers

• Banks are legally required to lower interest rates over time

• With each payment, principal decreases, so interest lowers

How do you avoid paying interest on your credit card (or any other loan for that matter)?

• Always make the minimum payment over time

• Pay interest 1st, then pay what you can on leftover balance

• Always make the full payment on time

• Pay the principal 1st, then pay what you can on interest

Tags

CCSS.7.RP.A.3

Which is TRUE when you make only the minimum payment each month?

• You ar charged interest on the remaining balance

• Your credit line is restored to its maximum amount

• Credit card companies have permission to sell your information

• It is the fastest way to pay off your debt

A shorter auto loan term means ____ monthly payments & ____ total interest you'll pay.

• higher, less

• lower, more

• higher, more

• lower, less

All of the following is FALSE in regards to mortgages?

• After one missed payment, you can lose your home

• You will be charged fees

• Your credit score can take a hit

• After too many missed payments the house can go into foreclosure