Understanding Credit and Financing Quiz

Mortgages are the most common financing method for home purchases, allowing individuals to borrow money with the property as collateral.

APR, or Annual Percentage Rate, represents the total cost of borrowing on an annual basis, including interest and fees.

Credit scores assess an individual's creditworthiness, influencing the interest rates offered on loans.

Contactless payments allow card transactions without a signature or PIN, enhancing convenience and speed.

Secured loans require collateral, while unsecured loans do not have collateral requirements, impacting the level of risk for lenders.

A grace period on a credit card allows cardholders extra time to make payments without incurring interest, extending the due date.

Height and weight are not factors in creditworthiness assessment; lenders focus on financial factors like income, credit history, and debt.

The credit limit is the maximum amount of money a lender is willing to lend to a borrower.

Collateral is a property or asset offered by a borrower to secure a loan, providing a guarantee for the lender.

Employment history is not typically a component of a credit report, which focuses on credit-related information such as payment history and outstanding debts.

A cosigner on a loan provides a guarantee to the lender that they will repay the loan if the primary borrower defaults.

A fixed-rate remains constant throughout the loan term, providing predictability for borrowers as the interest rate does not change.

ROI, or Return on Investment, measures the profitability of an investment by comparing the gain or loss to the initial cost.

The debt-to-income ratio measures the proportion of a borrower's income used to repay debts, aiding lenders in evaluating repayment capacity.

LTV, or Loan-to-Value Ratio, represents the percentage of a property's value financed by a loan, impacting the level of risk for lenders.

Loan consolidation involves combining multiple loans into a single one with a lower interest rate, simplifying repayment.

TransUnion is a credit reporting agency responsible for collecting and maintaining credit information on individuals.