Credit Unit Test Review, 2024

Front

What is an Adjustable Rate Mortgage (ARM)?

Back

An ARM is a type of mortgage where the interest rate can change periodically based on changes in a corresponding financial index.

Front

Who might benefit from an ARM?

Back

Individuals like DyNia, who plan to live in their home for a short period, may benefit from an ARM.

Front

What is one advantage of a longer loan term?

Back

A longer loan term typically results in smaller monthly payments.

Front

What does the term 'loan term' refer to?

Back

The loan term refers to the length of time you have to repay a loan.

Front

What is an amortization schedule?

Back

An amortization schedule is a table that outlines each payment on a loan, showing how much goes toward principal and interest.

Front

True or False: An amortization schedule is only used for mortgages.

Back

False. An amortization schedule can be used for any large purchase loan, such as a car.

Front

What is revolving credit?

Back

Revolving credit is a type of credit that allows the borrower to borrow up to a certain limit and pay back varying amounts each month.

Front

What is an example of revolving credit?

Back

A credit card is a common example of revolving credit.

Front

What is the difference between fixed-rate and adjustable-rate loans?

Back

Fixed-rate loans have a constant interest rate throughout the term, while adjustable-rate loans have interest rates that can change.

Front

What factors can affect the interest rate on an ARM?

Back

Interest rates on an ARM can be affected by market conditions, economic indicators, and the specific index to which the loan is tied.