Loan Lexicon Labyrinth

What is the term for the amount of money that is borrowed and must be repaid, not including interest?

• Interest rate

• Principal

• Collateral

• Credit score

What is the term for the asset that a borrower offers to a lender as security for a loan?

• Interest rate

• Principal

• Collateral

• Credit score

What is the term for the cost of borrowing money, typically expressed as an annual percentage of the loan amount?

• Interest rate

• Principal

• Collateral

• Credit score

What is a numerical expression based on a level analysis of a person's credit files, representing the creditworthiness of an individual?

• Interest rate

• Principal

• Collateral

• Credit score

If the interest rate on a loan increases, what happens to the cost of borrowing?

• It decreases

• It stays the same

• It increases

• It is not affected by the interest rate

Which of the following can be used as collateral for a secured loan?

• A car

• A credit card

• A job offer

• A personal guarantee

What might happen if a borrower defaults on a secured loan?

• The interest rate will decrease

• The borrower's credit score will improve

• The lender may take possession of the collateral

• The principal amount will be forgiven

What does a high credit score typically indicate to lenders?

• The borrower has a high level of debt

• The borrower is more likely to default on a loan

• The borrower is less likely to repay a loan on time

• The borrower is more likely to repay a loan on time

What is the principal amount of a loan?

• The total amount of interest paid over the life of the loan

• The initial amount of money borrowed before interest

• The value of the collateral

• The borrower's credit score

How can collateral affect the interest rate of a loan?

• Collateral has no effect on interest rates

• Providing collateral usually results in a higher interest rate

• Providing collateral usually results in a lower interest rate

• Collateral only affects the loan term, not the interest rate