General factors to consider when shopping for a consumer loan

Factors to Consider Before Taking Out a Consumer Loan

You've made the decision to purchase an item that is affordable only with a loan. When shopping for a loan, there are many aspects of the loans that

you should examine. Which of the following questions should be asked and answered about a specific loan proposal before accepting a lender's

offer? Check all that apply.

What is the total cost of transaction $($cost of item purchased plus cost of loan$)?$

If I accept the loan, what is my new debt safety ratio?

What late payment charges, if any, can be accessed, and when?

Does the loan have a prepayment penalty?

What is the loan's APR?

You're shopping for a big loan, but you have misgivings about Rajiv, the loan officer, at an institution you just visited. What are some reasons that may

have you uneasy about accepting a loan there? Check all that apply.

Rajiv told you that the interest rate is the only important fee to worry about and that discussing the APR is an unnecessary complication.

Rajiv said that today is the only day you can secure the loan with favorable terms.

Rajiv pointed out that the APR and interest rate were different.

Rajiv volunteered pertinent information that you didn't even know enough to ask about.

Rajiv discussed options for taking out a smaller loan, such as selling current assets to raise a bigger down payment.

Your parents may be able to help you with the down payment, but Rajiv told you to assume they will and to enter a down payment on the

application including their contribution.

When you filled out the loan application, Rajiv told you to leave out the smaller amounts you owe to department stores.

Rajiv went over the fine print, such as late payment charges and prepayment provisions.

What are the characteristics of your reasons for feeling uneasy about Rajiv the loan officer? Check all that apply.

The loan officer's embellishment of the facts

The way the loan officer omitted pertinent information

Feeling under pressure to make a decision

Your friend suggested you look into a variable$-$rate loan. What questions should you ask? Check all that apply.

What changes after a rate adjustment$-$the monthly payment amount or the number of monthly payments left on the loan?

Can I afford the maximum possible monthly payment?

Is there a maximum rate?

How often is the rate subject to change?

Given the long list of relevant loan$-$related considerations described above, the paradox of choice often arises when attempting to make borrowing

decisions. Which of the following phrases addresses the characteristics and recommended solutions for this phenomenon? Check all that apply.

Keep it simple and select the easiest or least expensive alternative

Arises when there are too few alternatives and you wish you had more features or options to select from

Prepare a list of possible alternatives and make a random selection

Be prepared to ask for assistance