Loan Fundamentals Vocab Check

Match each type of loan to what it usually helps people pay for

• Vehicle

• Small Business Loan

• tuition and college costs

• Student Loan

• start or run a business

• Mortgage

• House, home, or property

• Auto Loan

Why do people get loans?

• People love being in debt.

• Some purchases are too big/expensive for people to be able to pay for upfront.

• Taking out loans is a great strategy for building credit.

• It's better to pay for everything with loans, instead of cash/money.

Mike takes out a loan for $12,500 to help rent a space for his small business. The bank charges him 6.8% interest, and he will have 5 years to pay back the money.

The amount $12,500 is called the (a)   of the loan.

Mike takes out a loan for $12,500 to help rent a space for his small business. The bank charges him 6.8% interest, and he will have 5 years to pay back the money.

What is the TERM of this loan?

• $12,500

• 6.8%

• 5 years

• 36 months

Which situation would NOT be an appropriate situation to get/be a cosigner?

• Jill just got into college and is getting her first credit card. She doesn't have any credit built, so her dad cosigns on the credit card with her.

• Makayla is getting her first apartment. The landlord wants her paychecks to be 3x greater than the rent, but hers are only 2.5x greater. Her mom cosigns the lease.

• Shanae's husband got into a car accident and lost his job. He needs to replace his car, but doesn't have proof of income so the bank doesn't want to give him a loan. Shanae cosigns so he can buy a used card.

• Caitlin's best friend has a brilliant idea for a small business. She doesn't have a business plan, but she really thinks she can make a profit. She also can't find anyone to invest. She asks Caitlin to cosign so she can get a small business loan to rent a storefront.

In order to grow his business, Dale needs a business loan. The bank says they need (a)   to secure the loan, so he uses his house. He didn't ask his wife, and she's mad! What if his business struggles and they lose their house?

All of the following can help you get a LOWER interest rate on a loan, EXCEPT...

• Already having several other loans that you haven't finished paying back yet

• Having a good credit score

• Being employed full-time

• Getting a secured loan

When Megan first gets a mortgage to buy her house in 2020, the interest rate is 2.1%. But in the years that follow, the Federal Reserve raises the federal interest rate, and her bank raises her interest rate to 3.6%. Then, the bank raises the rate to 5.6%. Now, the interest rate is 7.2%. What type of loan did Megan get?

• Fixed rate loan

• Variable rate loan

• Secured loan

• Unsecured loan

Lucy gets a $1,000 cash advance to help her cover a bill. The lender charges her 45% interest, so when she gets her paycheck next week, she only ends up with $550 from her $1,000 paycheck. What type of loan did she get?

• Student Loan

• Mortgage

• Payday Loan

• Auto Loan

Jamila gets a loan to buy a car worth $35,000. She borrows $22,000 and plans to pay it back over 5 years. The interest rate is 7.03%. Match each piece of information with its terminology.

• 7.03%

• Interest rate

• 60 months

• Term

• Auto Loan

• Type of loan

• $22,000

• Principal