What is Credit?

Fill in the blank: Credit is receiving fund either directly or indirectly to buy goods and services today with the promise to pay for them in the ________.

• future

• present

• bank

• market

Fill in the blank: The amount that was originally borrowed is called the ________.

• Principal

• Interest

• Dividend

• Premium

Fill in the blank: The amount that the borrower must pay for the use of someone else’s funds is called ________.

• Interest

• Dividend

• Principal

• Equity

Which of the following is a characteristic of a secured loan?

• Not backed with collateral

• Backed up with collateral

• Interest rate is usually higher

• Guaranteed only by a promise to repay it

Which of the following is an example of an unsecured loan?

• House loan

• Car loan

• Credit card

• Mortgage

Which type of credit allows you to be approved up to a certain credit limit and use at any time?

• Installment

• Revolving

• Secured

• Unsecured

Which type of credit involves borrowing a set amount and making equal payments?

• Installment

• Revolving

• Secured

• Unsecured

Which of the following is an advantage of credit?

• A) Paying interest

• B) Can cause large amounts of debt

• C) Protection against fraud

• D) None of the above

Which of the following is a disadvantage of credit?

• Useful for emergencies

• Paying interest

• Establish a positive credit history

• Protection against fraud

What is a credit card?

• A card that allows you to borrow money from a financial institution to purchase items now and pay for them later.

• A card that only allows you to spend the money you have.

• A card used only for identification purposes.

• A card that can only be used at one store.