Unit 5 Review Personal Finance

Characteristics:

1. 1. protected by an asset

2. 2. collateral

3. 3. you don’t legally own the property until the debt is paid

4. less risk for the lender

Which type of loan has these characteristics?

• Unsecured

• Secured

Credit Cards

Personal Loans

Lines of Credit

Student Loans

These are examples of _________ loans.

• Unsecured

• Secured

Which loan has the following advantages AND disadvantages:

Lower Interest Rates

-

Higher Borrowing Limits

-

Longer Repayment Terms

• Unsecured

• Secured

Which loan has the following advantages AND disadvantages:

*Higher Interest Rate

*Does not require

collateral

• Unsecured

• Secured

What action can the lender take if the borrower does not repay the unsecured loan?

• The lender can foreclose or repossess the property

  used as collateral for the loan.

  You can lose the property.

  Report delinquent payments to the credit

  bureau and will affect credit score.

• The lender can sue you and turn your debt over to

  a collection agency Garnish your wages

  Put a lien on other assets to collect if you sell

  Report delinquent payments to the credit

  bureau and will affect credit score.

  
  

Why do interest rates increase on unsecured loans and lower on secured loans?

• It will cost more money to hold an item

• It will cost less money to hold onto your item

• It increases with the risk imposed by an unsecured loan

• It decreases with the risk imposed by an unsecured loan

What consequences would happen if a person defaults too long on an auto loan?

• Foreclosure

• Prison

• Loan forgiveness

• Repossession

If a person is reported to the credit bureau for late payments then what consequence could follow?

• Lower credit score and high interest rates

• Higher credit score and lower interest rates

• Lower credit score and lower interest rates

• Higher credit score and higher interest rates

If a home is worth $500,000, then what down payment SHOULD be made?

• $100,000

• $50,000

• $25,000

• $75,000

Rental units are often more popular with young people because

• Homeowners insurance is expensive

• Rent prices never increase in a rental unit

• Equity builds up over time and you can sell later on

• Monthly payments are lower and less maintenance