Answers2027 Ignite Financial Literacy-Personal Finance - EL3403Credit and Loans

Credit and Loans Answers

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1
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Which statement is true of both mortgages and auto loans?

A
They are riskier than student loans for lenders.
B
They do not require a minimum payment.
C
They are secured loans and generally require a down payment.
D
They have higher interest rates than credit cards.
2
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The simple interest on a loan of $200 at 10 percent interest per year is

A
$10 per year until the loan is paid off.
B
$15 per year until the loan is paid off.
C
$20 per year until the loan is paid off.
D
$25 per year until the loan is paid off.
3

A credit score is based in part on

A
employment and race.
B
income and location.
C
employment and trust.
D
payment history and total debt.
4

Read the scenario.Jay and Laura have been dreaming of purchasing their first home together. They've been diligently saving and have managed to accumulate a significant sum for a down payment.How does their decision to make a larger down payment benefit their financial situation as they purchase a home?

A
It increases the interest rate on the loan.
B
It decreases their credit score.
C
It increases the home’s value.
D
It decreases their monthly payment.
5

Which describes the difference between simple and compound interest?

A
Simple interest is paid on small, short-term loans, while compound interest is paid on large, long-term loans.
B
Simple interest is paid on the principal, while compound interest is paid on the principal and interest accrued.
C
Simple interest is paid on large, long-term loans, while compound interest is paid on small, short-term loans.
D
Simple interest is paid on the principal and interest accrued, while compound interest is paid only on the principal.
6

Consumers who pay more than the minimum payment on credit cards

A
pay less interest in the long run.
B
are able to buy more things.
C
see their credit scores decrease.
D
qualify for mortgages.
7

A way to build good credit is

A
using only secured loans.
B
taking out many lines of credit.
C
paying bills when they are due.
D
using only credit cards.
9

Read the scenario.Casey has been saving for a new car and is ready to make a purchase. Having a substantial amount to put down as a down payment, Casey approaches the car dealership. The salesperson and the loan officer view Casey's willingness to make a high down payment positively.Why would Casey be considered a lower risk by the lender for planning to make a high down payment?

A
It shows that Casey prefers a high-interest rate.
B
It shows that Casey is committed to paying off the loan.
C
It shows that Casey may not need a loan at all.
D
It shows that Casey might refinance the loan soon.
10

The chart shows a range of credit scores.

Question illustration
A
find it easy to get a loan.
B
find it hard to get a loan.
C
get a loan with low payments.
D
get a loan with low interest.
11

An example of secured credit is a

A
payday loan.
B
credit card.
C
mortgage.
D
medical bill.
12

good credita bank accounttax returns

A
good credit
B
a bank account
C
tax returns
13

principal borrowedoutstanding balanceprojected balance

A
principal borrowed
B
outstanding balance
C
projected balance
14

For which buyer would a lender most likely approve a $200,000 mortgage?

A
a person with a credit score of 800 with a large amount of debt who has recently switched to a lower-paying job
B
a person with a credit score of 760 with a small amount of debt who has had steady employment for many years
C
a person with a credit score of 650 with a large amount of available credit who has a low-paying, but steady job
D
a person with a credit score of 600 with a small amount of available credit who has recently switched to a high-paying job
15

Consumers who pay more than the minimum payment on credit cards

A
pay less interest in the long run.
B
are able to buy more things.
C
see their credit scores decrease.
D
qualify for mortgages.
16

Read the scenario.Jay and Laura have been dreaming of purchasing their first home together. They've been diligently saving and have managed to accumulate a significant sum for a down payment.How does their decision to make a larger down payment benefit their financial situation as they purchase a home?

A
It increases the interest rate on the loan.
B
It decreases their credit score.
C
It increases the home’s value.
D
It decreases their monthly payment.
17

[BLANK]

A
credit card
B
mortgage
C
tax
D
bond
18

credit cardmortgagetaxbond

A
credit card
B
mortgage
C
tax
D
bond
19

Which describes the difference between secured and unsecured credit?

A
Secured credit is backed by an asset equal to the value of a loan, while unsecured credit is not guaranteed by a material object.
B
Unsecured credit is backed by an asset equal to the value of a loan, while secured credit is not guaranteed by a material object.
C
Secured credit is risky because banks cannot seize assets, while unsecured credit is less risky because it is backed by material objects.
D
Unsecured credit enables lenders to seize an asset if a loan is not paid, while secured credit prohibits lenders from taking material objects.
20

What is a benefit of obtaining a personal loan?

A
getting money with special repayment terms
B
getting money with favorable interest rates
C
getting small amounts of money to use immediately
D
getting large amounts of money to use immediately
21

[BLANK]

A
principal borrowed
B
outstanding balance
C
projected balance

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