02.06 Can I Get a Ride Quiz example #4805

Installment credit- Building an addition to a house is very expensive. As it is unlikely that Nafar will pay the entire expense up-front, her best option is to use installment credit. This allows her to pay a large expense that does not vary in fixed payments over time.

low credit score and difficulty getting another loan- A credit score is a number that indicates your credit-worthiness. Scores are based, in part, on payment history. Lenders use credit scores to determine whether to grant a loan and at what interest rate. Jack's unreliable payment history will lower his credit score, making lenders less likely to offer him credit. If he is offered credit, his interest rate will likely be much higher than others who have reliably made their loan payments on time.

down payment- Lenders will sometimes offer a lower interest rate to those who make a down payment. This makes sense because the borrower has already invested some of his or her own money into the item and will, therefore, be less likely to default on the loan. This decreases the risk for the lender.

fixed rate- A fixed rate mortgage is simply a loan in which the interest rate and monthly payment amount do not change over the life of the loan.

Service credit- involves paying a deposit and then making payments based on consumption. This type of credit is often used to pay utility expenses, like electricity, which may vary over the course of a year.