U3 - Types of Loans Continued

What is used as collateral in a home equity loan?

• Personal savings

• Home equity

• Student loan

• Credit card

What is the risk associated with home equity loans?

• High interest rates

• Losing the home to foreclosure

• No grace period

• Need for a co-signer

Who sets the interest rates for federal student loans?

• Private banks

• The government

• Credit unions

• Online lenders

What is the term for the difference between the value of a property and the amount owed on the mortgage?

• Interest

• Equity

• Collateral

• Principal

Which type of loan is often used to pay for college expenses?

• Home equity loans

• Personal loans

• Student loans

• Auto loans

What is a co-signer?

• A person who pays the loan interest

• A person who takes over the loan if the borrower fails to pay

• A person who sets the loan terms

• A person who provides the loan

What can happen if a borrower fails to make payments on a home equity loan?

• The loan is forgiven

• The interest rate is reduced

• The home may be foreclosed

• The loan term is extended

Why are cash advances considered predatory?

• They have no interest

• Interest accumulates immediately

• They are interest-free

• They have a long grace period

What do pawnshops offer loans based on?

• Credit score

• Income level

• Value of the item (collateral)

• Employment status

What happens if a pawnshop loan is not repaid?

• The borrower gets a refund

• The item is returned to the borrower

• The pawnshop keeps the item and sells it

• The loan is extended