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?
With regard to a lien, who has the first right to the asset until the lien is paid off?
Your credit score or FICO score is an indicator of your ability to pay off the loan. What is a prime FICO score?
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
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