How Credit Works Answers

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1
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Which types of credit are most similar to each other?

A
auto loan and mortgage loan
B
auto loan and personal loan
C
credit card and mortgage loan
D
mortgage loan and personal loan
2
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Georgia needs to periodically use her credit card for extra money to pay for medical and unexpected expenses. She usually pays it off every six months.Which type of repayment schedule is described in this scenario?

A
fixed
B
revolving
C
installment
D
collateralized
3

[BLANK]

A
cash
B
collateral
C
fees
D
interest
4

Read the information about two competing credit cards. Credit Card 1Credit Card 2Interest rate0% introductory rate, then 13.8% after one year12.1%Annual feeNoneNo annual fee in the first year, then $30 each year thereafterCredit Card 1 would be the better option if the borrower

A
had major expenses in the first year.
B
spent a lot of money in the second year.
C
used the card regularly in the long term.
D
carried a large balance in the long term.
5

How do government regulators protect consumers?

A
by investigating complaints made by lenders
B
by using borrower information responsibly
C
by disclosing accurate credit terms
D
by ensuring lenders comply with the law
6

Clarissa and Carlos are homeowners who have decided to purchase a piece of land adjacent to their home. The land is for sale for $10,000.Which loan would require them to use their vehicle as collateral?

A
title loan
B
payday loan
C
merchant loan
D
peer-to-peer loan
7

Solomon is a college student who needs a good-quality computer for his schoolwork. He wants to apply for a credit card to cover the cost. Solomon is considering two different cards. One card has an APR of 12% while the other card has a variable APR between 10% and 15%.What other information does Solomon need to make an informed decision?

A
the taxes associated with each card
B
the late fees associated with each card
C
the type of collateral associated with each card
D
the annual percentage rate associated with each card
8

What is collateral?

A
a type of unsecured credit
B
property given as security for a loan
C
funds borrowed to buy property
D
a payment to reduce overall debt
9

Credit regulations require lenders to

A
consider only borrowers’ salaries.
B
disclose credit terms to borrowers.
C
use borrowers’ personal information.
D
attract borrowers as they see fit.
10

Bob wants to borrow $5,000 to pay for a vacation. He plans to pay the loan back quickly using a bonus that he will receive in a few months. He does not want to pay a high interest loan.Which loan would be best?

A
title loan
B
payday loan
C
student loan
D
peer-to-peer loan

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