Worksheets3.4 Practice Understanding Car Loan/Financing Basics
Total questions: 22
Worksheet time: 12mins
What does the term "interest rate" refer to in the context of a car loan?
The price of the car
The percentage charged for borrowing money
The length of the loan
The amount of your down payment
What is a "down payment" when buying a car?
The total amount borrowed
The monthly payment
The initial amount paid upfront
The interest rate
What does "total financed amount" represent in a car loan?
The car's sticker price
The amount you borrow after down payment and trade-in
The total interest paid
The monthly payment
If you have a good credit rating, what is most likely to happen to your car loan interest rate?
It will increase
It will decrease
It will stay the same
It will double
How does a higher interest rate affect your monthly car loan payment, assuming all other factors stay the same?
It decreases the payment
It increases the payment
It has no effect
It eliminates the payment
If you increase your down payment on a car, what happens to the total financed amount?
It increases
It decreases
It stays the same
It doubles
What is the relationship between a longer loan term and the total amount of interest paid?
Longer term means less interest paid
Longer term means more interest paid
No relationship
Longer term means no interest paid
If you choose a shorter loan term, what happens to your monthly payment?
It decreases
It increases
It stays the same
It is eliminated
What effect does a high trade-in value have on the amount you need to borrow for a car loan?
Increases the amount to borrow
Decreases the amount to borrow
Has no effect
Doubles the amount to borrow
If you want to pay the least amount of interest over the life of your car loan, which strategy should you choose?
Choose the longest loan term possible
Make the smallest down payment
Choose the shortest loan term you can afford
Ignore your credit rating
A student is comparing two car loans: Loan A has a 3-year term at 5% interest, and Loan B has a 6-year term at 5% interest. Both loans are for the same amount. Which loan will result in paying more total interest?
Loan A
Loan B
Both are the same
Not enough information
Suppose you have two loan offers for the same car: one with a higher interest rate but a shorter term, and one with a lower interest rate but a longer term. What should you consider to decide which loan is better for you?
Only the monthly payment
Only the interest rate
The total interest paid and your ability to afford the monthly payment
Only the loan term
If you want to lower your monthly payment, which of the following actions would be most effective?
Increase the loan term
Increase the interest rate
Decrease your down payment
Ignore your credit score
A car costs $20,000. You make 5,000 down payment and have a $2,000 trade-in. What is your total financed amount? How much do you have to borrow?
$20,000
$15,000
$13,000
$17,000
If you have a poor credit rating, how might that affect your car loan options?
You will get a lower interest rate
You may have to pay a higher interest rate
You will not need a down payment
You will get a longer loan term automatically
A student is offered a car loan with a 7% interest rate for 5 years or a 4% interest rate for 3 years. If the student can afford the higher monthly payment, which loan should they choose to pay less total interest?
7% for 5 years
4% for 3 years
Both are the same
Not enough information
If you want to minimize your total cost of ownership for a car, which combination is best?
High interest rate, long loan term, low down payment
Low interest rate, short loan term, high down payment
High interest rate, short loan term, low down payment
Low interest rate, long loan term, low down payment
You are offered two loans for the same car: Loan X has a lower monthly payment but a longer term, and Loan Y has a higher monthly payment but a shorter term. What is a potential disadvantage of choosing Loan X?
You will pay less total interest
You will pay more total interest over time
Your credit score will decrease
The car will cost less overall
What do we call a fee that is collected for using someone's money?
Deposit
Interest
Loan
Check
Why is it important to understand interest rates when taking out a loan?
Lower interest rates mean you pay back more money
Interest rates do not affect loans
Higher interest rates mean you pay back less money
Interest rates determine how much extra money you need to pay back
What does it mean to have a good credit score?
You have a lot of debt
You never borrow money
You are reliable in paying back borrowed money on time
You pay a higher interest rate on loans
What does "loan term" mean?
The total amount of the loan
The duration/time over which the loan is repaid
The interest rate applied to the loan
The monthly payment amount
