Question

read the scenario.
casey has been saving for a new car and is ready to make a purchase. having a substantial amount to put down
down payment, casey approaches the car dealership. the salesperson and the loan officer view casey’s willingn
to make a high down payment positively.
why would casey be considered a lower risk by the lender for planning to make a high down payment?
○ it shows that casey prefers a high - interest rate.
○ it shows that casey is committed to paying off the loan.
○ it shows that casey may not need a loan at all.
○ it shows that casey might refinance the loan soon.

Explanation:

• Option 1: A high down - payment is not related to preferring a high - interest rate. Lenders usually offer lower interest rates for borrowers with good financial behavior, so this is incorrect.
• Option 2: Making a high down - payment means Casey has more of their own money invested in the car. This shows a commitment to repaying the loan because they have a larger stake in the asset (the car) and are less likely to default, as defaulting would mean losing that down - payment.
• Option 3: Casey is at the dealership to get a loan for the car purchase, so the idea that they may not need a loan is wrong.
• Option 4: A high down - payment has no direct relation to refinancing the loan soon. Refinancing is about changing the loan terms later, and a high down - payment is about the initial loan setup.

Answer:

B. It shows that Casey is committed to paying off the loan.