Question

1. what are 2-3 reasons that explain why people may have different perspectives about taking on debt? 20. if you have a loan with a longer term, you are more likely going to have ______________ (lower / higher) monthly payments and pay ______________ (less / more) in total interest. 21. explain how an amortized loan works and why it’s a good idea to pay more than the amortized payment on a loan if you are able. 22. identify if the following statements would increase or decrease your monthly auto payment: a. you have a large down payment $square$ increase $square$ decrease b. the term on your auto loan is long $square$ increase $square$ decrease c. you have a low credit score $square$ increase $square$ decrease d. your loan has a high apr $square$ increase $square$ decrease

Explanation:

For Question 19:

1. Financial Situation: People with stable, high incomes may view debt as a tool to invest or make large purchases, while those with limited income see it as a risky burden.
2. Knowledge of Personal Finance: Those educated on interest rates and loan terms may be more comfortable with strategic debt, while others may fear unknown long-term costs.
3. Life Goals: Someone saving for a home may take on a mortgage willingly, while someone prioritizing debt-free living avoids all non-essential debt.

For Question 20:

A longer loan term spreads the principal over more months, reducing monthly costs. But interest accrues over more time, raising total interest paid.

For Question 21:

An amortized loan splits payments into principal and interest; early payments go mostly to interest, later to principal. Paying extra reduces the principal faster, cutting total interest and shortening the loan term.

For Question 22:

a. A large down payment reduces the loan amount, lowering monthly costs.
b. A longer term spreads costs over more months, reducing payments.
c. A low credit score leads to higher interest rates, increasing payments.
d. A high APR means higher interest charges, raising monthly payments.

Answer:

1. 1. Differences in personal financial stability and income levels.
2. Varied levels of financial literacy and understanding of debt terms.
3. Divergent short- and long-term life goals (e.g., homeownership vs. debt-free living).
4. lower; more
5. An amortized loan is structured so that monthly payments cover both the loan principal and accrued interest, with early payments going mostly toward interest and later payments focusing more on principal. Paying more than the required monthly amount reduces the outstanding principal faster, which decreases the total amount of interest you will pay over the life of the loan and shortens the time it takes to pay off the loan entirely.
6. a. Decrease

b. Decrease
c. Increase
d. Increase