Interest
Why do banks charge Interest on loans
To earn profit & compensate for the risk of lending
The value of a car overtime will most likely _____________making it a liability instead of an asset
Depreciate
Which credit score range is correct;
380-579- Poor
580-669- Excellent
740-850- Good
380-579
Name the three participants involved in P2P lending
1. Borrower
2. Lender/Investor
3. Lending Platform
An Installment loan where the borrower receives a fixed amount upfront and pays it back with interest in monthly installments
Personal Loan
What is APR
The interest rate and fees attached to borrowing
_______________ a car will never provide you with "equity"
Leasing
This type of credit card is backed by an asset (capital) the lender can claim if debt is unpaid
Secured Credit Card
The amount of time given to repay a loan (Principal + interest)
Loan term
True/False
A secured loan must be back by an asset
True
What type of interest rate is attached to credit cards
Variable Interest Rate
Amount of money put forward to partially pay for the product and reduce the principal amount
Down Payment
Which of the 5 C's Accounts for 35% of your credit score
Character- On time Payments
Why do P2P loan carry higher risk for lenders
Borrowers may not repay, no guarantees
The ability to repay debt is called
Capacity
What type of interest rate comes with an amortization schedule
Fixed Interest rate
What is the name of this formula?
Interest = (Principal × Rate × Time)
Simple Interest Formula
Keeping credit utilization under this percentage helps to grow FICO overtime
30%
Why have P2P lending become a popular alternative to traditional lending( banks)
- More flexible repayment terms
- More convenient
- Appeals to low-fair range credit borrowers
It is best to keep Debt-to-Income (DTI) ratio below
40%
What is Interest
The additional cost for borrowing
_____________allows you to drive a new car every few years
The amount of time you have been using credit accounts for what percentage of FICO score
15%
The uncertainty around default that can cause financial losses
Risk
Negligent credit management behavior when a borrower fails to make required payments on debt
Delinquency