Credit and Loans

In determining whether to issue a loan, banks are not allowed to ask about an applicant’s:

employment history.
date of birth.
country of origin.
income tax returns.

Country of origin

The chart shows a range of credit scores.

A credit score between 500 and 600 means a consumer would most likely:

find it easy to get a loan.
find it hard to get a loan.
get a loan with low payments.
get a loan with low interest.

Find it hard to get a loan.

Both mortgages and auto loans:

are riskier for lenders.
are riskier for borrowers.
require a down payment in general.
require minimum payments.

(not) are riskier for borrowers

A credit score is based in part on:

employment and race.
income and location.
employment and trust.
payment history and total debt.

Payment history and total debt.

What best determines whether a borrower’s investment on an adjustable rate loan goes up or down?

a fixed interest rate
a bank’s finances
a market’s condition
a person’s finances

A market’s condition

Which best describes a way people can use personal loans?

to buy a house
to buy a bicycle
to pay for college
to pay for groceries

To pay for college

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

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

A person with a credit score of 760 with a small amount of debt who has had steady employment for many years.

Simple interest is paid only on the _________ ________.

Principal borrowed

The simple interest on a loan of $200 at 10 percent interest per year is:

$10 per year until the loan is paid off.
$15 per year until the loan is paid off.
$20 per year until the loan is paid off.
$25 per year until the loan is paid off.

$20 per year until the loan is paid off.

Which describes the difference between simple and compound interest?

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

Simple interest is paid on the principle, while compound interest is paid on the principal and interest accrued.

An example of secured credit is a:

payday loan.
credit card.
mortgage.
medical bill.

Mortgage

What is a benefit of obtaining a personal loan?

getting money with special repayment terms
getting money with favorable interest rates
getting small amounts of money to use immediately
getting large amounts of money to use immediately

(not) getting money with special repayment terms (not) getting money with favorable interest rates

What is the compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate?

$10.00
$21.00
$33.10
$46.41

$33.10

The type of credit people are most likely to use for small purchases during their lifetime is:

a credit card.
a personal loan.
an auto loan.
a mortgage.

A credit card

Which describes the difference between secured and unsecured credit?

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

Secured credit is backed by an asset equal to the value of a loan, while unsecured credit is not guaranteed by a material object.

Consumers who pay more than the minimum payment on credit cards:

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

Pay less interest in the long run.

People who want to buy a house typically ask the bank for a ________ over a 10- to 30-year period.

Mortgage