Questions and Answers
What is the simple interest on a loan of $200 at 10 percent interest per year?
20 per year until the loan is paid off.
Simple interest is paid only on the...
principal borrowed.
What is a benefit of obtaining a personal loan?
getting large amounts of money to use immediately.
A way to build good credit is...
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A similarity between mortgages and auto loans is that both...
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Filing for bankruptcy can make it hard for a consumer to reestablish and obtain...
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People who want to buy a house typically ask the bank for a...
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Consumers who make higher payments on credit cards...
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The type of credit people are most likely to use during their lifetimes is a...
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What best determines whether a borrower's interest rate goes up or down?
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An example of secured credit is a...
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In determining whether to issue a loan, banks are not allowed to ask about an applicant's...
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Which describes an example of using unsecured credit?
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What is the compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate?
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A credit score is based in part on...
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Which describes the difference between simple and compound interest?
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Study Notes
Interest Types
- Simple interest on a $200 loan at 10% per year amounts to $20 annually until repayment.
- Simple interest applies only to the principal amount borrowed.
- Compound interest on a three-year, $100 loan at 10% totals $33.10.
Loans and Credit
- A personal loan provides immediate access to large sums of money.
- Mortgages and auto loans are considered less risky for lenders.
- A mortgage, typically repaid over 10 to 30 years, is a common request for home buyers.
Credit Management
- Building good credit requires timely bill payments.
- Higher credit card payments reduce overall interest paid in the long run.
- The most commonly used form of credit throughout life is a credit card.
Creditworthiness
- A borrower's interest rate is largely determined by market conditions.
- Secured credit examples include mortgages, which are backed by collateral.
- Unsecured credit can be illustrated by purchasing items like home gutters with a credit card.
Credit Applications
- Banks are prohibited from inquiring about an applicant's country of origin when issuing loans.
- Credit scores consider factors such as income and total debt.
Distinctions in Interest
- The key difference between simple and compound interest lies in how the latter also accrues interest on previously earned interest alongside the principal.
Studying That Suits You
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Description
Test your knowledge on essential concepts of credit and loans with these flashcards. Each card defines terms related to simple interest, personal loans, and credit-building strategies. Ideal for students or anyone looking to improve their financial literacy.
