Understanding Loans and Their Types

Olivia wants to buy a new car but doesn't have enough savings. What is a loan in this context?

• A gift of money that does not need to be repaid

• A sum of money borrowed that is expected to be paid back with interest

• A type of investment in stocks

• A form of insurance policy

Emma is looking to buy a new house. Which of the following is a common type of loan she might consider?

• Mortgage

• Dividend

• Equity

• Annuity

Michael borrowed some money from a bank to buy a car. What is the principal amount in this loan?

• The total amount of interest paid over the life of the loan

• The original sum of money borrowed

• The monthly payment amount

• The total amount repaid at the end of the loan term

Scarlett borrowed some money from a bank to buy a new car. What is the term for the fee charged by the bank to Scarlett for the use of this borrowed money?

• Dividend

• Interest

• Premium

• Commission

Ava is considering taking out a loan to buy a new car. Which of the following is a secured loan?

• Personal loan

• Credit card loan

• Car loan

• Payday loan

Liam is considering taking out a loan to buy a new car. He wants to understand the cost of borrowing. What does APR stand for in the context of loans?

• Annual Percentage Rate

• Annual Payment Rate

• Average Payment Rate

• Annual Principal Rate

Zoe took a loan from the bank, and it has a compound interest rate. How is the interest on Zoe's loan calculated?

• Only on the initial principal

• On the initial principal and also on the accumulated interest from previous periods

• Only on the accumulated interest

• Only on the final amount

Emma is considering different types of loans to fund her education. Which of the following is an example of an unsecured loan?

• Mortgage

• Auto loan

• Student loan

• Home equity loan

Daniel is planning to take a loan to buy a new car. What is the purpose of a loan amortization schedule for him?

• To show the total interest paid over the life of the loan

• To outline the repayment of the loan principal and interest over time

• To calculate the loan's interest rate

• To determine the loan's eligibility criteria