It's a Money Thing: Loan Basics 💵

The details of any loan will include the following 3 components:

• The principal, the interest rate, and the loan term

• The money you pay, the money the lender pays, and the principal

• The mortgage, the auto loan, and the small business loan

• The loan amount, the credit card payment, and the statement

Why are secured loans considered less risky to the lender?

• Lenders are allowed to conduct background checks for secured loans

• Lenders can take valuable collateral if you fail to repay your loan

• Lenders give secured loans all the time, so they're more comfortable doing them

• Lenders can check your credit score before giving a secured loan, which they can't do for an unsecured loan

Having a good credit score, making a larger down payment, and finding a cosigner with good credit are all ways to...

• Decrease your principal

• Decrease your interest rate

• Increase your term

• Increase your total payments

Each of these statements describes a variable rate loan EXCEPT...

• Typically starts with a lower interest rate than a fixed rate loan

• Is riskier to the borrower because the interest rate could increase substantially

• Is almost always a better option

• Can increase or decrease the interest rate over the course of the loan