Question

quiz
question 5 of 8
how do loan terms affect the cost of credit?
select a response.

• longer loan terms have lower monthly payments and lower interest
• shorter loan terms have higher monthly payments and lower overall interest
• loan terms are based on your pay schedule and how often you get paychecks
• loan terms only apply to loans with collateral but do not apply to those without collateral

Explanation:

• Longer loan terms have lower monthly payments but higher total interest, so the first option is incorrect.
• Shorter loan terms require paying back the principal faster, leading to higher monthly payments, but less time for interest to accrue, resulting in lower overall interest.
• Loan terms are not based on pay schedules, so the third option is wrong.
• Loan terms apply to both secured (collateral) and unsecured loans, so the fourth option is incorrect.

Answer:

B. Shorter loan terms have higher monthly payments and lower overall interest