Question

directions: determine if each statement is true or false and indicate t for true and f for false. (1 point per question)

1. annual interest rates for alternative loans can be as high as 300%.
2. all lenders check a person’s credit report and score during the loan approval process.
3. the terms of a loan are always consistent for the length of the loan.
4. an example of closed - end credit is a secure credit card.
5. if an individual does not meet the credit terms for a pawn loan, the lender will keep the property.
6. evaluating the purpose of credit is an important consideration to using credit responsibly.
7. depending on the credit terms, if a person has a late payment, consequences including higher interest rates, may occur.

Explanation:

• Statement 8: Some alternative loans like payday loans can have extremely high annual interest rates, and 300% is within the realm of possibility.
• Statement 9: There are lenders (e.g., some payday lenders) that do not check credit reports and scores.
• Statement 10: Loan terms can change. For example, in an adjustable - rate mortgage, the interest rate (a key loan term) can change over time.
• Statement 11: A secure credit card is a type of revolving credit (open - end credit), not closed - end credit. Closed - end credit is for a specific amount and a specific term (e.g., a car loan).
• Statement 12: In a pawn loan, the property is collateral. If the borrower fails to meet the terms (e.g., repay the loan), the lender can keep the property.
• Statement 13: Understanding why you are taking on credit (e.g., for a necessary expense vs. an unnecessary luxury) is crucial for responsible credit use.
• Statement 14: Many credit agreements have clauses that state if there is a late payment, the interest rate (among other things) can increase.

Answer:

1. T
2. F
3. F
4. F
5. T
6. T
7. T