6
QuizMultiple Choice

The Cost of Credit

Question 6 • Personal Finance - EL3403

Fido wants to buy a new car. He will need to get a car loan. Fido decides to wait for a few months until his credit history improves. Which explains whether Fido is making a sensible decision?

Answer
A
Fido’s decision is sensible because the selling price of the car should be less in a few months.
B
Fido’s decision is sensible because the cost of the car loan should be less if his credit history improves.
C
Fido’s decision is not sensible because he needs the car right away.
D
Fido’s decision is not sensible because it does not matter if he buys the car now or in a few months.

Explanation

A stronger credit history can make Fido a lower-risk borrower, which may help him qualify for a lower interest rate. That would reduce the cost of his car loan, so waiting for his credit history to improve is sensible. The car’s selling price is not necessarily going to be lower in a few months.

AI-written and checked against the verified answer.

Previous
Next