Exam: 02.06 Can I Get a Ride Quiz
Terms in this set (5)
Jack has been very unreliable making loan payments in the past. He has been late on many payments, and completely missed several others. He can expect to now have a
low credit score and difficulty getting another loan
Question Information: A credit score is a number that indicates your credit-worthiness. Scores are based, in part, on payment history. Lenders use credit scores to determine whether to grant a loan and at what interest rate. Jack's unreliable payment history will lower his credit score, making lenders less likely to offer him credit. If he is offered credit, his interest rate will likely be much higher than others who have reliably made their loan payments on time.
A lender may view a large down payment from a borrower to be a
reduction of risk
Question Information: Lenders will sometimes offer a lower interest rate to those who make a down payment. This makes sense because the borrower has already invested some of his or her own money into the item and will, therefore, be less likely to default on the loan. This decreases the risk for the lender.
A bank offers a mortgage that lists 2% interest for the first year of the loan. This rate might increase in future years if the loan has a(n)
Question Information: An adjustable rate mortgage (ARM) is a type of mortgage in which the interest rate can periodically change. The initial rate will generally be lower than a fixed rate loan. Yet the lender has the option to raise it at set intervals throughout the life of the loan. This often makes it a costlier option if you plan to stay in your home for many years
Which type of credit is used for utilities?
Question Information: Service credit involves paying a deposit and then making payments based on consumption. This type of credit is often used to pay utility expenses, like electricity, which may vary over the course of a year.
Joy has been saving her earnings to make a down payment on a new car. Which loan terms will result in highest total cost for the loan?
5.5 percent loan for 60 months
Question Information: In this scenario, Joy is considering various loan terms. Two factors to consider are the total cost of the loan and the monthly payment. While the monthly payment is likely to be less the longer the loan, a higher interest rate increases the total cost of the loan. Therefore, a 5.5% loan will have the largest total cost.
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