Understanding Credit and Loans

Why do people typically borrow money?

• To save money for the future

• To cover daily living expenses

• To fund major purchases, like education or a home

• To invest in the stock market

Which of the following is NOT a source of credit?

• Banks

• Credit unions

• Retail stores

• Utility companies

What is a key difference between federal student loans and private student loans?

• Federal loans have higher interest rates

• Federal loans are easier to qualify for

• Federal loans offer flexible repayment plans

• Federal loans are only available to international students

Which of the following credit products is typically used to purchase a car?

• Credit card

• Personal loan

• Car loan

• Mortgage

What is the primary characteristic of a payday loan?

• Long repayment terms

• High-interest rates

• Low fees

• Flexible repayment options

What is the difference between fixed and variable interest rates?

• Fixed rates change based on the market; variable rates remain the same

• Fixed rates remain the same; variable rates fluctuate based on market conditions

• Variable rates are lower than fixed rates

• Fixed rates are only available for car loans

What does a credit report contain?

• The borrower’s loan amount only

• Detailed history of a borrower’s financial behavior

• Only information on credit card balances

• A list of the borrower’s assets

How often are individuals entitled to a free credit report?

• Monthly

• Annually

• Every six months

• Once every two years

What is a credit score primarily used for?

• Determining your net worth

• To calculate interest on loans

• To measure your creditworthiness

• To decide if you qualify for federal aid

Which factor has the greatest impact on your credit score?

• Types of credit

• Length of credit history

• Payment history

• New credit