What causes the total amount of interest paid on a mortgage to be so much higher than on other types of debts?
Borrowers typically delay making mortgage payments because their home cannot be repossessed for nonpayment
The principal on a mortgage is high and the term is long
The APR on a mortgage is typically between 20-30%, which is higher than for other types of debt
Homeownership is not very common in the US, so mortgages are priced high because demand is so low
Which of the following is a good reason to choose a 30-year, fixed-rate mortgage?
You want low, predictable monthly payments
You want to minimize the amount of interest you’ll pay over the life of the loan
You want to take advantage of the ups and downs of the market and don’t mind risk
You want to make high monthly payments and close your mortgage sooner
Danya has found her dream home, and it’s on the market for $200,000. Each of these is a way she can decrease the total amount she’ll pay EXCEPT…
Choose a shorter loan term
Qualify for a lower interest rate
Increase her down payment
Choose a mortgage with a higher APR
Why are payday loans so popular?
They are a fast, easy way to save money and budget effectively
They meet the need for quick cash for very large purchases such as cars and homes
They are a terrific way to build your credit history and improve your credit score
They are accessible to people who need to borrow small amounts of money and don’t have any better options
Three of these statements reflect payday loans. Choose the other statement, which is aligned with a traditional bank loan instead.
APR can easily be over 200%
Easy to obtain without a lot of paperwork
Requires a credit check and suitably high credit score
Requires payment in full in less than a month
David is a recent college graduate who took out student loans to pay for his education. He plans to use his degree to secure a high-paying job in the near future. Which of the following statements BEST categorizes his debt?
It's a good debt as it's seen as an investment with potential future returns
It's a bad debt since education doesn't guarantee a job
It's a bad debt since all student loans are risky
It's a good debt only if David manages to secure a job immediately after graduation
If a user doesn't make a "Buy Now, Pay Later" service payment on time, what might happen?
Their account will be closed
Their purchase might be rescinded
They might be charged a late fee and their account could be sent to collections
Their interest rate might significantly increase
Maria is feeling upset after a recent disagreement with a close friend and is considering using her credit card to go on a shopping spree in hopes of boosting her mood. Which of the following statements best describes a potential financial impact of this decision?
Maria will likely save money because most stores offer deals for emotional shoppers
Maria will likely make wise financial decisions since shopping can be therapeutic
Maria's credit card company will likely reduce her interest rates to support her during this emotional time
Maria may make impulsive purchases and accumulate debt
How do the Annual Percentage Rates (APRs) on payday loans get to be so high?
The amount of money people borrow using payday loans is typically quite high – $10,000 or more – so the fees are also high
They make most of their money through ATM withdrawal fees as well as overdraft fees on checking accounts
The loan amounts are small, but the fees charged are relatively high and are renewed on a very short time-scale
The loans go to affluent banking customers, so they charge a lot for the exclusivity
What reason below helped contribute to the popularity of Buy Now, Pay Later services?