Unit 4 Review (Types of Credit)

Antonio has $4000 saved to use for a down payment, and he’s about to buy a car that costs $29,000. How much would you expect his loan principal to be?

• $4000
• $25,000
• $33,000
• $29,000 x his interest rate

As you move through your payment schedule on an amortized loan, what will happen to the interest portion of each month’s payment?

• The interest portion will grow
• The interest portion will shrink
• The interest portion will stay the same
• The interest portion will sometimes grow and sometimes shrink

Ramon and Stephen are each considering taking out a $1200 loan so they can buy dirt bikes to enjoy on the weekend. Ramon's bank is offering him a 4.3% interest rate, while Stephen's is offering him a 2.4% interest rate.Which of the following statements is TRUE.

• If each loan has a term of 3 years, Ramon's monthly payments will be higher
• If they both make $300 payments a month, Ramon will pay off his loan faster
• Both men would likely get a better interest rate if they used a credit card, rather than a personal loan, to make their purchases
• If Ramon applies to Stephen's bank, instead, for his loan, he's guaranteed to get the same 2.4% interest rate that Stephen's been offered

Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?

• Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount.
• The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly.
• The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan.
• Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash.

Purchasing a car on a loan through the bank or dealership is called:

• franchising
• amortizing
• financing
• loaning

Brenda's bank offers car financing for 3, 4, or 5 years. If Brenda chooses 5-year financing, how many monthly payments will she have?

• 12
• 36
• 48
• 60

Which of the following has no effect on the monthly payment?

• Interest Rate
• Down Payment
• Number of months the car is expected to be financed
• Length of buyer's driving record

An increase in which of the following will decrease the monthly payment?

• Interest rate
• Principal
• Down payment
• None of the above

Which statement about car leases is TRUE?

• Leases typically have lower monthly payments than you'd pay to purchase the same car using a loan.
• Leases typically have higher monthly payments than you'd pay to purchase the same car using a loan.
• Leases are always the better option when getting a car, especially if you have a downpayment.
• Leases are never the better option when getting a car, especially if you have a downpayment.

Which of the following does NOT represent an advantage of leasing a car?

• After the lease ends, you sell your car back to the dealer and get most of your payments back in equity.
• Leases only last a short number of years, so leasing allows you to regularly upgrade your car to newer, safer, more modern vehicles
• Because your car is covered under warranty for the duration of your lease, you're less likely to be liable for costly repairs or maintenance.
• If you really love the car, you're often able to buy it from the dealer at the end of the lease.