Question

1. what are 2-3 reasons that explain why people may have different perspectives about taking on debt?
2. if you have a loan with a longer term, you are more likely going to have _____________ (lower / higher) monthly payments and pay _____________ (less / more) in total interest.
3. explain how an amortized loan works and why it’s a good idea to pay more than the amortized payment on a loan if you are able.
4. identify if the following statements would increase or decrease your monthly auto payment:

a. you have a large down payment $square$ increase $square$ decrease
b. the term on your auto loan is long $square$ increase $square$ decrease
c. you have a low credit score $square$ increase $square$ decrease
d. your loan has a high apr $square$ increase $square$ decrease

Explanation:

Question 19:

1. Financial Situation: People with stable high incomes may view debt as a tool to invest or make large purchases, while those with unstable low incomes may fear debt due to repayment risks.
2. Financial Literacy: Those with strong financial knowledge may understand strategic debt (e.g., low-interest mortgages) and be open to it, while less informed people may see all debt as harmful.
3. Cultural Values: Some cultures emphasize avoiding debt to build security, while others normalize using credit for life milestones like education or homeownership.

Question 20:

A longer loan term splits the principal into more monthly installments, reducing each payment. However, interest accrues over more periods, leading to higher total interest paid.

Question 21:

An amortized loan has fixed monthly payments that first cover most interest, then shift to paying down the principal over time. Paying more than the required amount reduces the principal faster, which cuts the total interest accrued and shortens the loan term.

Question 22:

a. A large down payment reduces the loan principal, so monthly payments fall.
b. A longer loan term splits the principal into more payments, lowering each one.
c. A low credit score leads to higher interest rates, increasing monthly payments.
d. A high APR means more interest is added to monthly payments, raising their cost.

Answer:

19.

1. Differences in personal financial stability
2. Variations in financial literacy levels
3. Divergent cultural attitudes toward debt

1. lower; more

1. An amortized loan has fixed monthly payments, where early payments go mostly toward interest and later payments focus on the principal balance. Paying more than the required amortized payment reduces the outstanding principal faster, which decreases the total amount of interest you will pay over the life of the loan and shortens the time it takes to pay off the loan.

22.
a. Decrease
b. Decrease
c. Increase
d. Increase