Free Printable Types of Credit

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Types of Credit - Unit Test

Total questions: 30

Worksheet time: 21mins

Name

Class

Date

Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?

All 3 cards are completely different

Debit cards and prepaid debit cards are the same

Debit cards and credit cards are the same

All 3 cards are completely the same

The average APR for a payday loan is closest to …

14%

40%

400%

Which of the following statements comparing credit and debit cards is TRUE?

Far more businesses accept credit cards than debit cards

Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard

Credit card companies provide you with a monthly statement, while debit cards do not

With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later

Which of the following is most likely to represent a fixed rate, secured debt?

A student loan

A credit card

A prepaid debit card

An auto loan

Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?

Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount

The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly

The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan

Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash

If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?

Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help

Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control

Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms

Explore whether a free or non-profit credit counseling service could help

When loans are amortized, monthly payments are _______ , while the amount of your monthly payment applied to interest ________ and the amount of your monthly payment applied to the principal _______ over time.

Constant, Increases, Increases

Constant, Decreases, Increases

Variable, Decreases, Increases

Variable, Decreases, Decreases

Which of the following is true about fixed and adjustable-rate mortgages?

Fixed-rate mortgages have a constant payment every month, but an interest rate that increases throughout the term of the loan

Fixed-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

The two mortgages work the same way but are called different names depending if they come from a bank or a credit union

Which of these credit payback strategies would lead to the HIGHEST overall cost?

Paying off your credit card bill in full every month

Paying 20% of your credit card balance every month on time

Making the minimum payment (3% of your credit card balance) every month on time

Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

10.

Denise took out a payday loan for $300 in August. By February of the next year, she was able to pay back the loan, but she had spent a total of $750 doing so. What’s the most likely story of how this happened?

The minimum monthly payment for payday loans is usually only $10 or $15, so a lot of interested accumulated

Upfront, Denise knew there would be $450 of fees attached to the loan, but she took out the loan anyway

Payday loans must be paid in full within two weeks, and if not, the only option is to renew the loan for a high penalty fee, which she did approximately 12 times

Denise not only paid the $300 she owed, but she prepaid an extra $450 in case she needs another loan in upcoming months

11.

Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she’s looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, which advice should she follow?

Put in $0 for your down payment, and choose a loan with a short term length

Put in $2500 for your down payment, and choose a loan with a short term length

Put in $3500 for your down payment, and choose a loan with a long term length

Put in $5000 for your down payment, and choose a loan with a long term length

12.

Reading through a credit card’s Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?

When given a range of APRs like this, you can assume most cardholders pay the lowest rate listed

Your APR will be within that range, depending on the strength of your credit history

In this case, you want the highest APR in the range because you’ll earn more

The APR on credit cards is usually fixed, so it won't be adjusted as long as you are a cardholder

13.

What is an advantage of using a credit card?

It will not affect your credit score or credit history

Since it is tied directly to your checking account, it prevents you from spending money you do not have

If you need to carry a balance, the interest rates are generally quite low (less than 5%)

You can make an emergency purchase that you otherwise don’t have the money to pay for right now

14.

Credit card disclosure: "Your due date is at least 25 days after the end of the billing cycle. We will not charge you interest on new purchases provided that you have paid your previous balance in full by the due date each month." Identify the true statement.

If you make the minimum payment on your card within the 25 day period, the credit card company will not charge you interest

If you pay your previous balance in full after the due date, the credit card company will not charge you interest

25 days is an exceptionally long period without paying a credit card bill

The 25 days after the end of the billing cycle is referred to as the grace period

15.

A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest.

higher, less

higher, more

lower, less

lower, more

16.

Select the statement below that accurately describes a characteristic of a credit card.

You owe the same payment every month

You must have money deposited into a checking account to use the credit card for purchases

Making full payments on-time every month is the only way to avoid interest charges

They do not charge interest

17.

Which of the following statements is CORRECT about secured loans?

They are a good choice to use for student loans

If the borrower does not make payments, the lender can repossess the item

In the event of default, the borrower loses nothing except for the down payment

They usually have higher interest rates as compared with unsecured loans

18.

An excellent credit score will help with which aspect of car financing?

Bargaining for a great sales price

Receiving a large down payment

Qualifying for a low interest rate

Having a wide selection of term lengths

19.

As a young adult, all of the following are good strategies for building credit, EXCEPT:

Open a credit card, with your parent or guardian as a cosigner

Take out a payday loan

Become an authorized user on a credit card used by your parent or guardian

Open and use a secured credit card

20.

Amy and Chuck each buy a house in the same neighborhood for $250,000. Amy's monthly mortgage payment is $400 more per month than Chuck's. Which one of the following statements could explain this difference?

Amy chose a shorter term for her mortgage, so her monthly payments are higher

Amy made a larger down payment, so her monthly payments are also larger

Chuck chose a shorter term for his mortgage, so his monthly payments are also lower

Chuck has a lower credit score, so his interest payments are also lower

21.

Why are payday loans so much easier to qualify for than traditional bank loans?

Payday loans are only used by affluent households, and the banks know they have enough money to cover them

Payday loans are just another word for direct deposit, and almost all employers offer their employees direct deposit instead of a paper paycheck

Payday loans require proof of employment or other regular income but not a credit check

Payday loans are typically for such small dollar amounts that no one cares if you repay them or not

22.

Trudy tells her mom that she wants to buy a house within two years of graduating from college. Her mom says Trudy will need a down payment first. What is a down payment?

A large sum of money you pay when taking out a mortgage so that the principal of your loan is smaller

A specific type of tax advantaged bank account used for saving money to buy a house

The first year’s worth of property taxes, held in reserve

A prepayment to a real estate agent so that they will start helping you house hunt

23.

Duc has a credit card with a $1000 credit limit. His outstanding balance is currently $800. What is the maximum amount he can now spend on this credit card?

$200

$800

$1000

$1800

24.

Why would credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full?

This is required by federal law for tax purposes

This allows the card holder to pay their bill quickly and close the card when they’re ready

This enables the credit card company to make more money

This helps cardholders develop financial independence

25.

Cost of credit expressed as a yearly percentage

Mortgage

Principal

APR

Finance company

26.

What is a loan term?

The amount of time a revolving line of credit can be open

The payment of income to a savings account in regular payments over a set period of time.

The period in which the loan is to be repaid, each payment broken down into individual installments

Specifically related to the black market for human organs, and typically meant as the length of time one's kidney will be used for other purposes

27.

Someone who legally agrees to take responsibility for a person's debt if they cannot repay it

Debtor

Creditor

Lender

Cosigner

28.

A card that is directly connected to your checking account; it enables you to conduct ATM transactions and to make purchases instead of using cash or writing a check

Credit card

Debit card

Prepaid card

Gift card

29.

A loan with an interest rate that does not change over the life of the loan

Variable-rate loan

Balloon loan

Fixed-rate loan

Adjustable-rate mortgage

30.

A loan taken by individuals and businesses to make real estate purchases without paying the entire value of the purchase up front

Mortgage

Down payment

Equity

Lease

100 %

Types of Credit - Unit Test

Total questions: 30

Worksheet time: 21mins

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