WorksheetsCREDIT FINAL
Total questions: 64
Worksheet time: 36mins
Which best describes the difference between secured and unsecured loans?
Secured loans require collateral, while unsecured loans do not.
Secured loans have a higher interest rate than unsecured loans.
Secured loans are only available to individuals with good credit, while unsecured loans are available to anyone.
Secured loans do not require a credit check, but unsecured loans do.
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?
Unsecured loan
Auto loan
Secured loan
Payday loan
Which type of financial aid is considered free money?
Loans
Grants
Work-study
Scholarships
What is the main benefit of taking out a federal student loan instead of a private loan?
Federal student loans offer lower interest rates and more flexible repayment options.
Federal student loans do not need to be repaid after graduation.
Federal student loans offer more money than private loans.
You will have a higher interest rate for a federal student loan.
When do you need to apply for the Free Application for Federal Student Aid (FAFSA)?
The year before college and every year you attend.
Once, after you have been accepted into college.
Once, after you have completed your first semester.
First grade.
What is the best way to stay out of debt?
Continuously take out personal loans to cover expenses.
Rely on credit cards for all of your purchases and pay them off at the end of the month.
Spend only what you can afford and avoid using credit cards for unnecessary purchases.
Borrow money from friends and family whenever you need it.
Which of the following types of credit typically has the LOWEST interest rate?
Payday Loan
Auto Loan
Buy Now, Pay Later
Credit Cards
Mortgage
All of the following are ways to build your credit EXCEPT?
Use a co-signer
Become an authorized user
Get credit for the bills you pay
Practice good credit habits
Use cash or debit and avoid credit
The average APR for a payday loan is closest to …
4%
14%
40%
400%
What is a "down payment" in the context of auto loans?
Monthly fee charged by the dealership for maintenance.
A portion of the vehicle's purchase price paid upfront.
Additional charge for customizing the vehicle's features.
Refundable deposit made to secure the loan.
A percentage of the total loan paid in addition to the purchase price.
A loan with a shorter term will have ______________ monthly payments & you will pay _________________ in total interest.
higher, more
lower, less
higher, less
lower, more
lower, lower
Which of the following will lower the overall cost of your auto loan?
Choosing a longer loan term
Obtaining a higher interest rate
Making a larger down payment
Applying for a loan with no credit history
Why do dealerships tend to emphasize monthly payments over other loan factors?
To make the purchasing process easier to understand.
To shift focus away from total cost and interest rates.
To showcase the variety of available vehicle options.
To be able to sell cars at lower interest rates.
What is a key difference between a loan and a lease when buying a car?
Ownership: With a loan, you own the car at the end of the term, while with a lease, you return the car to the dealer.
Duration: Loans usually have longer terms compared to leases.
Maintenance Responsibility: With a lease, the dealer often covers maintenance costs, whereas with a loan, the owner is responsible for maintenance.
Nothing: A lease and a loan are essentially the same thing.
A loan with a LONGER term length will have __________ monthly payments, and you will pay __________ in total interest.
higher, less
higher, more
lower, less
lower, more
What is a payday loan?
A long-term installment loan
A short-term, high-interest loan typically due on the borrower's next payday
A government-sponsored financial aid program
A no-interest loan provided by employers
What is an outstanding balance?
The amount you paid in your minimum payment
The amount you spent in total
The amount you still owe after you have made your most recent payment
The amount you still have available in your line of credit
Why is it more difficult to get out of debt when only paying the minimum payment?
You pay such a small amount that the credit card company uses your payment for lunch.
You pay such a small amount that your payment can't outpace the compounding interest on your debt.
Your credit limit always resets, so you have a lot of spending power each month
It's not. Paying only the minimum payment will help you pay off your credit cards faster.
What does APR stand for?
Annual Percentage Rate
Amortization Premium Rate
Always Prepare Records
Affixed Percentage Rate
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
Credit score, income, and assets.
What is the BIGGEST FACTOR in determining a credit score?
Credit mix
Amounts Owed
Payment History
Length of Credit History
New Credit Applications
Which of the following is an EXCEPTIONAL credit score?
800 +
740-799
670-739
580 - 669
579 & LOWER
Which of the following will likely have the longest term?
Mortgage
Auto Loan
Buy Now, Pay Later
Payday Loan
Credit Card
Which loan would I get if I wanted to purchase a home?
Mortgage
Student Loan
Auto Loan
Credit Card
Buy Now, Pay Later
Which of the following will likely have the highest interest rate?
Student Loan
Auto Loan
Payday Loan
Buy Now, Pay Later
Credit Card
What is the typical term for an auto loan?
5 - 7 years
500 dollars
10-15 years
automotive financial impact assessment term
180 months
What is the typical term for a mortgage?
5 - 7 years
500,000 dollars
15-30 years
house loan
10 - 15 years
Who gives student loans?
only parents and grandparents
the federal government or private institutions
only the federal government
only private institutions
payday loan lenders
Where would you likely find a "Buy Now, Pay Later" Loan?
When making an online purchase.
At a bank.
At a gas station.
At a public library.
At payday loan lender.
What is the "loan principal"?
The total amount paid at the end of a loan, including interest and fees.
The original amount borrowed before interest or fees are added.
The total interest charged on a loan.
The monthly payment required to pay off a loan.
Which of the following is unique to a credit card and not typically associated with a debit card?
Directly linked to a checking account
Easily replaceable if lost.
Involves pre-loaded funds for spending
You pay interest on unpaid balances
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
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
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
Doc 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
Which of the following statements is true about this Schumer Box?
Depending on your creditworthiness, the APR for a borrower will always either be 8.99%, 10.99% or 12.99%
There is an introductory APR that is valid only for 1 year, but then the permanent APR is lower than that at 8.99%.
You will never be charged an APR higher than 14.99%
A 28.99% APR may be applied to your account for late payment
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
What is the average interest rate on a credit card?
5% - 10%
10% - 15%
16% - 24%
25% - 35%
400%
Which of the following is unique to a debit card and not typically associated with a credit card?
Annual fee for card usage
Accumulation of reward points with every transaction
Access to funds from the cardholder's account
Borrowing money with interest charged
Which of the following will help you to get a lower APR on your credit card?
A higher credit score.
A lower credit score.
A deep, golden tan.
A certificate of deposit.
Which best describes how a credit card works?
The credit card company extends you a line of credit. You then pay a small percentage of the cost of those purchases in one annual payment.
The credit card company extends you a line of credit. You purchase "stuff" and the purchase gets directly paid with funds in your checking account.
The credit card company extends you a line of credit. This is free money that you can use to purchase the "stuff" that you need.
The credit card company extends you a line of credit. You purchase "stuff" and then have the choice to pay the balance in full or a minimum payment each month.
What is the average APR on a credit card?
40 - 50%
5 - 10%
0 - 5%
15 - 20%
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
What is meant by the loan "term"?
The total interest paid over the life of the loan
The monthly payment amount
The length of time agreed upon to repay the loan
The credit score required to qualify for the loan
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
Why are payday loans considered controversial?
They offer low-interest rates
They primarily target high-income individuals
They often target vulnerable and low-income populations with high fees and interest rates
They are supported by consumer advocacy groups
All of the following contribute to your credit score EXCEPT?
Your payment history.
How much you owe (your unpaid debt).
Length of credit history.
Your credit mix.
Your income level.
What is "opportunity cost"?
The benefits that we gain when choosing one way of using our money over another.
The price that you pay for each opportunity to check your credit score.
The amount of interest you must pay in order to purchase a car.
The potential benefits that we miss out on when choosing one way of using our money over another.
Example of a secured loan
car loan
loan based on credit worthiness
Example of unsecured loan
house mortgage
credit card
The cost of a secured loan is typically lower than the cost of an unsecured loan because _______.
it requires collateral.
the loan takes longer to get.
it has high interest rates.
your parents will make sure you pay it back.
A loan to buy a property or a home:
Rent
Sublet
Closing Costs
Mortgage
A loan used to buy a house is called a
commercial loan
mortgage
line or credit
The best way to begin establishing good credit is to ________.
apply for a secured credit card
make regular purchases
pay bills on time
borrow frequently
The interest rate a credit card user will be charged on the unpaid portion of their balance
High Rate Method
Credit
Credit Bureau
Annual Percentage Rate (APR)
Money that is paid for the use of money is called ___.
Principal
Liquidity
Risk
Interest
What should you NOT use a loan to purchase?
A house
Tuition for higher education
Airline tickets to your dream vacation
A car
How can having a mix of credit accounts, such as a mortgage, car loan, and credit cards, affect your financial flexibility?
It limits the amount of credit you can access
It can improve your creditworthiness by showing you can manage different types of credit
It makes financial management more complex
It has no effect on financial flexibility
Imagine you have a mortgage, a car loan, and a couple of credit cards. What role does this diversity of credit accounts play in your financial health?
It complicates financial management
It has no role or impact
It can demonstrate to lenders your ability to manage various types of credit responsibly
It reduces your credit score
What is a common consequence of not managing credit properly?
Increased credit score
Lower interest rates on loans
Higher borrowing costs
More frequent loan approvals
