Understanding Loans and Credit

The video tutorial explains the key factors lenders consider when approving loans, such as credit score, income, employment history, debt-to-income ratio, and collateral. It also outlines the necessary information for loan applications, including personal details, credit history, and the purpose of the loan.

What is one of the primary factors lenders consider when determining loan interest rates?

• Your credit score

• Your age

• Your marital status

• Your education level

How does a lender use your credit history?

• To determine your age

• To assess your loan repayment reliability

• To calculate your monthly expenses

• To evaluate your educational background

Why is income level important for lenders when approving a loan?

• It determines your loan duration

• It reflects your social status

• It shows your spending habits

• It indicates your ability to repay the loan

What might a lender want to see in addition to a good credit score?

• Your favorite color

• Your income and employment history

• Your family tree

• Your travel history

What does a high debt-to-income ratio suggest about a borrower?

• They are likely to get a loan easily

• They have a stable financial situation

• They are a higher risk for lenders

• They have a good credit score

If a person has $20,000 in debt and $60,000 in income, what is their debt-to-income ratio?

• 1:5

• 1:4

• 1:3

• 1:2

What is collateral in the context of loans?

• A type of loan

• An asset used to secure a loan

• A form of insurance

• A credit score requirement

What happens if you fail to repay a loan secured by collateral?

• The lender takes possession of the collateral

• The lender reduces the loan amount

• The lender increases the interest rate

• The loan is forgiven

Which of the following is NOT typically required when applying for a loan?

• Employment history

• Purpose of the loan

• A list of personal hobbies

• Personal information

Why might a lender ask for your past addresses?

• To send you promotional offers

• To determine your loan amount

• To track your financial history

• To verify your identity