Module 3: Growing Credit Flashcards
9 Questions
100 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

Which of these criteria make a person a good cosigner? (Select all that apply)

  • They have a large amount of debt
  • They have a good credit score (correct)
  • They have a steady job (correct)
  • They have a history of late payments

    • How do lenders evaluate if a borrower or cosigner will pay them back?

    Capacity, collateral, character

    What is the correct definition of character for potential cosigners?

    The cosigner's current financial situation

    Why is Sarah unable to cosign for Chris?

    <p>She has made late payments which affect her character</p> Signup and view all the answers

    Which person would be the best choice for Chris to get a cosigner for a car loan?

    <p>A person with good credit history and a car and house</p> Signup and view all the answers

    What is the correct definition of a cosigner for a loan?

    <p>Someone who will promise to pay a loan if the borrower doesn't</p> Signup and view all the answers

    Why would a borrower get a cosigner for a loan?

    <p>They can't qualify for a loan by themselves</p> Signup and view all the answers

    What is the correct definition of capacity for potential cosigners?

    <p>The cosigner's credit history</p> Signup and view all the answers

    What is the correct definition of collateral for potential cosigners?

    <p>The cosigner's assets, such as a house or car</p> Signup and view all the answers

    Study Notes

    Cosigner Criteria

    • A good cosigner has a steady job, indicating financial stability and responsibility.

    Lender Evaluation Factors

    • Lenders assess potential borrowers or cosigners based on three C's: capacity (ability to repay), collateral (assets backing the loan), and character (trustworthiness and past credit behavior).

    Cosigner's Character

    • Character refers to the cosigner's current financial situation and creditworthiness, which reflects their reliability in fulfilling loan obligations.

    Late Payments and Credit History

    • A history of late payments negatively impacts a cosigner's character, making them an unsuitable choice for backing another's loan.

    Ideal Cosigner for Car Loan

    • The best choice for Chris's car loan cosigner would be someone with a pristine credit history and ownership of valuable assets, such as a car and a house.

    Definition of a Cosigner

    • A cosigner is an individual who agrees to take on the responsibility of repaying a loan if the borrower defaults, enhancing the chances of loan approval.

    Need for a Cosigner

    • Borrowers often seek cosigners when they lack the qualifications to secure a loan independently, typically due to insufficient credit history or income.

    Definition of Capacity

    • Capacity pertains to the cosigner's credit history, playing a critical role in assessing their ability to support the borrower financially.

    Definition of Collateral

    • Collateral includes the cosigner's tangible assets, such as a house or car, which can be claimed by lenders in case of loan non-repayment.

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Description

    Test your knowledge on the essential criteria for becoming a good cosigner and how lenders evaluate borrowers. This quiz covers key concepts such as capacity, collateral, and character, which are crucial in the lending process. Perfect for anyone looking to understand more about credit and cosigning.

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser