EverFi 8-12

Which of the following best describes a loan?

• A type of insurance coverage for unexpected losses

• A borrower promises to repay money from a lender

• A government grant for education

• A tax deduction for mortgage interest payments

Margo wants to purchase a new car. She doesn’t have enough in savings to cover the cost. She decides to look into loans from her bank. How can taking out a loan help Margo with her car purchase?

• It can help by reducing her total amount of debt

• It can help by not requiring any immediate down payment

• It can help by spreading out the expense over time

• It can help by having no impact to her credit score

Which best describes the difference between secured and unsecured loans?

• Secured loans require collateral, while unsecured loans do not

• Secured loans usually have higher interest rates than unsecured loans

Elliott renovates his home using a loan that requires him to sign over the title to his car if he doesn't pay as promised. What type of loan does Elliott have?

• Education loan

• Interest-free loan

• Secured loan

• Unsecured loan

How do loan terms affect the cost of credit?

• Longer loan terms have lower monthly payments and lower interest

• Shorter loan terms have higher monthly payments and lower overall interest

• Loan terms are based on your pay schedule and how often you get paychecks

• Loan terms only apply to loans with collateral but do not apply to those without collateral

Aisha needs a loan to finance her latest startup. She wants a loan with the lowest overall interest costs. She’s considering a 3-year loan with an 8% fixed interest rate or a 5-year loan with a 6% fixed interest rate. Why would Aisha pick the 3-year loan?

• It has a lower total cost.

• It has a smaller monthly payment.

• It has a lower interest rate.

• It has a higher loan amount.

A lender offers Frank a high-interest loan based on how much he makes at his job. He’ll have to pay it back quickly too, within the next month. Which type of predatory loan offer did Frank experience?

• Payday loan

• Mortgage loan

• Student loan

• Auto loan

A lender offers Frank a high-interest loan based on how much he makes at his job. He'll have to pay it back quickly too, within the next month. Which type of predatory loan offer did Frank experience?

• Bait and switch

• Payday loan

• Hidden fees

• Phishing scam

Emery applies for a loan online to help cover living costs while in college. Later, she notices her payments aren’t impacting the balance much. Looking closer, she finds extra fees in the agreement. Which type of predatory loan offer did Emery experience?

• Bait and switch

• Payday loan

• Hidden fees

• Phishing scam

Which type of financial aid is considered free money?

• Grants

• Work-Study programs

• Federal student loans

• ROTC