Loan Basics
What type of loan is paid off in equal payments over time?
Amortized Loans
What does APR stand for?
Annual Percentage Rate
What is the typical range for credit scores?
300-850
Calculate the interest on a $500 balance at 15% monthly interest rate for one month.
$75
Which loan term usually has the lowest interest rate?
(30-yr mortgage, 15-yr mortgage, 5-yr car loan, personal loan)
15-yr Mortgage
Which loan usually has the highest APR?
Payday Loans
What is a grace period on a credit card?
A grace period on a credit card is the time window between the end of a billing cycle and the payment due date, during which you can pay off your balance without incurring interest charges, as long as you pay the full balance due by the due date.
What happens if you make only minimum payments on a credit card?
Making only minimum payments on a credit card leads to several negative consequences: dramatically higher interest charges, a longer debt timeline, increased credit utilization, vulnerability to financial emergencies, and delayed future financial goals. Essentially, minimum payments are designed to keep you in debt for longer, rather than helping you eliminate it.
Polly's credit line access is $7,500. Her current balance is $1,274. How much credit does she have available?
$6,226
What factor most affects monthly mortgage payments: credit score, loan term, down payment, or employment?
Loan term
What happens to the principal portion of an amortized loan payment over time?
It increases while the interest portion of the payment decreases
If a credit card charges 18% APR, what is the approximate monthly interest rate?
1.5% or 0.015
What primarily influences the APR you get on a credit card?
Credit Score
You put $10,000 down on a car whose MSRP is $43,750. How much do you need to finance?
$33,750
What is the purpose of a Schumer Box on a credit card offer?
The Schumer Box on a credit card offer provides a summary of the card's key terms, including interest rates, fees, and other important details, in a clear and standardized format. It helps consumers compare credit cards.
How many monthly payments are there in a 15-year mortgage?
180 payments (unless you pay off more, sooner!)
How much would your minimum payment be if it's 2% on the remaining balance of $3000 or $40, whichever is greater?
$60
Name 3 factors that affect your credit score.
Payment history
Amounts owed (current debt)
Length of credit history
Types of credit
Recent credit activity
Past reliability
You need to take out a mortgage for a house worth $400,000. If you put 20% down, how much do you need to finance?
$320,000
You put down $3000 on a car whose MSRP is $20,000. What percent was your down payment?
15%
True or False (& explain): When you are shopping for a new car, make sure you tell the dealership how much you want to pay each month.
FALSE! They hide extra fees and higher interest when you give them a monthly rate. You want to use a loan calculator to make sure you're not paying too much in just interest!
Name 3 benefits of using a credit card.
Build credit
Rewards
Convenience
Emergencies
Protection from fraud
Etc.
What is a "credit utilization ratio" and how does it affect your credit score?
A "credit utilization ratio" is a percentage that indicates how much of your available credit you are currently using, and it's a significant factor in determining your credit score. Generally, a lower credit utilization ratio is better for your credit scores.
Calculate the approximate APR on a $900 loan with $100 of interest that must be paid in 30 days.
135%
You take out a 30-year mortgage at a 4.5% interest rate for $400,000. What is your monthly payment?
$2,026.74