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The Ultimate Applying for a Car Loan Quiz
by Staff
You want to buy a car and the only option available to you is to apply for a car loan. What do you need to know? What documentation do you need to provide? Whom do you turn to? Turn your attention to this car loan quiz and see whether you know all the answers.

Why do credit unions usually have good interest rates?

  • because they are large companies and can afford to offer good rates
  • because they're non-profits so they have low operating costs
  • because they have good standing with investment plans

If you want to apply for a car loan, what are the advantages in approaching banks?

  • They cater to individuals with good credit and they give better interest rates.
  • They know you best and want the best for you.
  • They are reliable and completely risk free.

You own a home and want to take out a home-equity loan. Will it be tax deductible?

  • definitely
  • no chance
  • very possibly

With regard to a lien, who has the first right to the asset until the lien is paid off?

  • the guarantor
  • the borrower
  • the lender

Your credit score or FICO score is an indicator of your ability to pay off the loan. What is a prime FICO score?

  • 650-800
  • 700-850
  • 750-850

Where can you establish your own credit report?

  • on the Internet
  • through your bank
  • from credit bureaus

If you have a low credit score, what can you do about it?

  • Make a claim with the credit bureau and insist on a recalculation.
  • Correct errors and improve your financial behavior.
  • Make the rounds of different credit bureaus till you find one that tallies a better score.

Aside from your credit score, what other factors might be taken into account to establish your credit worthiness?

  • your profession, home ownership and proof of employment
  • your bank statements and credit score of your guarantors
  • your assurances of reliability and your non-prison record

What percentage of your salary is the accepted maximum for spending on your vehicles?

  • 15% of your salary, after taxes
  • 20% of your salary, after taxes
  • 20% of your salary, before taxes

Why is depreciation a factor to consider when taking a car loan?

  • because the car depreciates in value, which raises the loan payback terms
  • because the car depreciates in value, which means that you may not want it anymore
  • because the car depreciates in value, which has implications for your overall ownership costs

How would a federal tax credit be of use to you in taking a car loan?

  • because there may be certain government incentives, depending on the type of car you want to buy
  • because it guarantees you a fair payback rate
  • because it means that you loan is government-backed, no matter your loan source

Most buyers offer a down payment of about 5%. Does this at least cover the sales tax and associated fees?

  • yes, by far
  • yes, just
  • usually not

If you are buying a car from a private seller who does not have an outstanding loan, what does the seller need to have?

  • access to the title
  • a good credit rating
  • adequate financial backing

You want to buy a car from a private seller who's still paying off his own car loan. What happens now?

  • The loan transfers to you and this reduces your own loan price.
  • He must finish paying off his loan but that does not hold up the sale.
  • He must finish paying off his loan first before the sale can be made.

What sort of documentation might a potential lender request?

  • proof of marriage, Social Security validation, proof of citizenship
  • proof of income, proof of residence, credit and banking history
  • proof of college education, proof of driving license, proof of a filed tax return for the previous year

In your car loan papers, there is some text about binding arbitration. What might this mean?

  • that you are disallowed from going to court in the case of a dispute
  • that you are bound by international arbitration channels
  • that you are bound to seek arbitration in a court of law

What does the annual percentage rate (APR) include?

  • the base interest rate and other loan costs
  • the yearly interest rate, broken into 12 even parts
  • the base interest rate and your annual payback ability

What happens to your loan when you refinance?

  • It is added to any future loans with the new organization.
  • It is scratched altogether.
  • The new organization pays it and you pay them from now on.

Which of these would it be wise to ask your lending company?

  • whether a car is a reasonable financial investment
  • whether it's possible to make payments early without any penalty
  • whether you can avoid an initial down payment

Under what circumstances would you consider refinancing?

  • if you want to take out a new loan
  • if your lending company declares bankruptcy
  • if you can get a lower interest rate or if you owe more than the car's worth