NGPF Intro to Credit

What is the principal in terms of credit?

• The interest charged on a loan

• The original sum of money borrowed or invested

• The total amount paid over the life of a loan

• The monthly payment amount

Which of the following best describes an interest rate?

• The fee charged for late payments

• The percentage of the principal charged by the lender for the use of its money

• The total amount of money borrowed

• The length of time over which a loan is repaid

What is a revolving line of credit?

• A loan that must be paid in full each month

• A credit arrangement that allows the borrower to use or withdraw funds up to a pre-approved credit limit

• A fixed amount of money borrowed for a specific purpose

• A type of credit that does not accrue interest

Which of the following is a characteristic of installment credit?

• It has no fixed repayment schedule

• It allows for variable monthly payments

• It involves regular, fixed payments over a set period

• It is typically used for short-term borrowing

What does APR stand for in the context of credit?

• Annual Payment Rate

• Annual Percentage Rate

• Average Payment Rate

• Annual Principal Rate

How is net worth calculated?

• Total assets minus total liabilities

• Total income minus total expenses

• Total savings minus total debts

• Total investments minus total loans

What is credit?

• A type of investment

• The ability to borrow money or access goods or services with the understanding that you'll pay later

• A savings account with a bank

• A financial penalty for late payments

Which of the following is a correct way to use a credit card?

• Maximize the credit limit to improve credit score

• Pay only the minimum payment each month

• Pay the full balance each month to avoid interest charges

• Use it for cash advances frequently

What is an installment loan?

• A loan that requires a single lump-sum payment

• A loan that is repaid over time with a set number of scheduled payments

• A loan that can be borrowed again once repaid

• A loan with no interest charges

Why do people use credit?

• To avoid paying for goods and services

• To build a credit history and improve credit score

• To decrease their net worth

• To eliminate the need for a budget