WorksheetsTypes of Credit Review
Total questions: 26
Worksheet time: 14mins
Which statement is true of both debit AND credit cards
Both can trap you in an endless cycle of debt if you’re not careful
Both allow you to make purchases in a store or online
Both typically have interest rates between 10-30%
Both require you to pay a minimum monthly payment when your bill arrives
Felix opens a credit card with no annual fee, so he assumes that using the credit card regularly will be absolutely free for the next two years while he finishes grad school. Why is his assumption incorrect?
Unless he pays the whole bill every month, he will pay interest according to his APR
He will automatically pay penalty fees if he uses his credit card for more than 3 consecutive months
If his grace period is any longer than 10 days, he will have to pay fees
He will need to pay a separate student fee because he is still in grad school
If you buy a $1000 bicycle, which credit card payoff strategy will result in your paying the LEAST total amount?
Pay the minimum monthly payment
Pay $100 per month for 10 months
Pay $250 per month until it’s paid off
Don’t make any payments until you have the full $1000 saved, regardless of how long that takes
Which word represents the total cost of the item you’re purchasing on credit minus any down payment you make upfront?
Principal
Term
Interest Rate
APR
Each of the following represents an installment loan EXCEPT…
Home mortgage
Auto loan
Student loan
Credit card
Which of these actions would most likely decrease a person’s net worth for at least the next 6 months?
Use a loan to buy a brand new car
Work 10 hours of overtime each week and put all extra earnings into a savings account
Work 10 hours of overtime each week and use all extra earnings to pay down student loan debt
Open 3 new credit cards but don’t spend any money on them
As you move through your payment schedule on an amortized loan, what will happen to the interest portion of each month’s payment?
The interest portion will grow
The interest portion will shrink
The interest portion will stay the same
The interest portion will sometimes grow and sometimes shrink
It’s time for Roxanne to start repaying her student loans, which are amortized over the next ten years. Her first month’s payment due is $396. How much should she expect to owe next month?
Substantially less than $396
Slightly less than $396
Exactly $396
Slightly more than $396
You’re debating whether to buy a trendy fall jacket that costs a whopping $200! You have it sitting in your online cart, and you see there’s a “Buy Now, Pay Later” option available for the jacket. Which best describes an example of how that would work?
You pay the full $200 now, but they wait a month to send it to you, giving you the chance to cancel, penalty free, if you change your mind
You pay $100 right now, you receive the jacket, and you owe $100 more a year later on the anniversary of your purchase date
They ship you the jacket now, and you owe four $50 payments, once every 2 weeks, until the jacket is paid in full
You reserve the jacket now, you pay as much or as little as you want in each payment, and when you eventually get to $200, they send you the jacket
Antonio has $4000 saved to use for a down payment, and he’s about to buy a car that costs $29,000. How much would you expect his loan principal to be?
$4000
$25,000
$33,000
$29,000 x his interest rate
If you were offered two auto loan options with the same principal and interest rate, but one was a 48-month loan and one was a 72-month loan, which outcome below will reflect the impact of that difference in term?
The 48-month loan will cost less money overall
The 48-month loan will have lower monthly costs
The 48-month loan will take longer to pay off
The 48-month loan will always be a better choice
Shonda’s mom recommends that she spend a year building her credit history and boosting her credit score before she applies for a loan to buy her dream car, which costs $54,000. Why is that good advice?
A good credit score will reduce her down payment
A good credit score will reduce her principal
A good credit score will reduce her interest rate
A good credit score will allow her to pay the full $54,000 in cash
If you use this type of card, you are spending money from your own bank account.
Credit Card
Debit Card
Both
Neither
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
A fully amortized payment is split into which two components?
The principal and the payment
The principal and the interest
The loan term and the interest
The interest rate and the total interest
Casey has an amortized loan payment of $400, and the interest they owe for that month is $50. By how much does Casey pay down the principal?
$50
$350
$400
$450
As the months progress on an amortized loan...
The payments stay the same, but the principal is paid down more quickly
The payments stay the same, but the principal is paid down more slowly
The payment sizes decrease, but the principal is paid down at the same rate
The payment sizes decrease, and the principal is paid down more quickly
If you can afford it, why is it a great idea to pay MORE than your amortized payment on a car, home, or other loan? Select all that apply.
You will pay your loan off faster
You will pay less total interest
You will pay less total principal
You will pay less money overall
How can making a larger down payment save you money when purchasing a car? (Choose two correct answers)
Your monthly payment will be higher
Your monthly payment will be lower
You will pay less interest over the life of the loan
You will pay more interest over the life of the loan
A higher credit score...
Will help you obtain a lower interest rate on an auto loan
Will help you obtain a higher interest rate on an auto loan
Has no impact on the interest rate on an auto loan
A longer term length will make your monthly payment lower and you will pay _______ interest when compared to a shorter term length and higher monthly payment.
MORE
LESS
Which statement most accurately describes the difference between leasing and owning a vehicle?
Leasing is a term used when you purchase a car for the longest term possible
Leasing a car is making monthly payments to use a car for a fixed period of time, but then you return it without owning it
Leasing is a term used when you take the car for an initial test drive
Leasing a car requires a very large down payment, while purchasing a car does not
According to the video, what is the first step in purchasing a new vehicle?
Take multiple vehicles for a test drive to see what features you like best
Create a budget and check your credit score
Get an insurance quote for you new vehicle
Decide which color vehicle you want most
