question 5 of 8\nhow do loan terms affect the cost of credit?\nselect a response.\nlonger loan terms have…

question 5 of 8\nhow do loan terms affect the cost of credit?\nselect a response.\nlonger loan terms have lower monthly payments and lower interest\nshorter loan terms have higher monthly payments and lower overall interest\nloan terms are based on your pay schedule and how often you get paychecks\nloan terms only apply to loans with collateral but do not apply to those without\ncollateral

question 5 of 8\nhow do loan terms affect the cost of credit?\nselect a response.\nlonger loan terms have lower monthly payments and lower interest\nshorter loan terms have higher monthly payments and lower overall interest\nloan terms are based on your pay schedule and how often you get paychecks\nloan terms only apply to loans with collateral but do not apply to those without\ncollateral

Answer

Brief Explanations:

  • Longer loan terms: While they may have lower monthly payments, the total interest paid over the life of the loan is higher because interest is charged over a longer period. So the first option is incorrect.
  • Shorter loan terms: With shorter - term loans, the principal is paid off more quickly. The monthly payments are higher (since the loan amount is divided over fewer months), but the overall interest is lower because the loan is outstanding for a shorter time.
  • Loan terms based on pay schedule: Loan terms are not primarily based on how often you get paychecks. Loan terms are more about the length of the loan (e.g., 3 - year, 5 - year) and are set by the lender based on factors like the type of loan, the borrower's creditworthiness, etc. So the third option is incorrect.
  • Loan terms and collateral: Loan terms apply to both secured (with collateral) and unsecured (without collateral) loans. For example, a personal loan (unsecured) has a loan term (e.g., 24 months), and a mortgage (secured) also has a loan term (e.g., 30 years). So the fourth option is incorrect.

Answer:

Shorter loan terms have higher monthly payments and lower overall interest.