Week 5 Flashcard (new)

Front

What is principal?

Back

The amount of money that you borrow from a lender

Front

What is term?

Back

The time period you have to pay off the loan.

Front

What is rate?

Back

The percent you pay in interest

Front

What does APR stand for?

Back

Annual Percentage Rate

Front

Which of the following loans will have the LOWEST monthly payment? 5% for 30 years, 5% for 20 years, 6% for 30 years, 6% for 20 years

Back

5% for 30 years

Front

Which of the following loans will have the HIGHEST monthly payment? 5% for 30 years, 5% for 20 years, 6% for 30 years, 6% for 20 years

Back

6% for 20 years

Front

How does loan term affect the total interest paid?

Back

A longer loan term results in a higher total interest paid, while a shorter loan term results in a lower total interest paid.

Front

Amortization breaks up your monthly payment into a ratio of two things: The amount of your money that goes to paying _____ and the amount of your money that goes to paying_____ each month.

Back

Interest and principal

Front

Initially, a large portion of each monthly payment is devoted to __________________________., but this will decrease over time since banks want to make profit upfront

Back

interest

Front

As the loan matures, larger portions of your monthly payment go towards paying down the ___________________________ instead of the interest.

Back

principal balance