Which of these statements is true?(1 point) Responses
The more you owe, the higher your interest payment will be.
There is no reason to pay off a loan early.
When shopping for a loan, you need to compare only APRs.
You can save money by making the smallest down payment the lender will allow.
The statement "The more you owe, the higher your interest payment will be" is true.
The statement that is true is: "The more you owe, the higher your interest payment will be."
To determine which statement is true, let's examine each statement individually:
1) "The more you owe, the higher your interest payment will be."
The general principle for loans is that the more you borrow, the more interest you will pay. As you accumulate more debt, the interest charged on that debt increases. Therefore, this statement is true.
2) "There is no reason to pay off a loan early."
Paying off a loan early can have several advantages. It helps you reduce the overall interest you pay over the loan term, saves you money in the long run, improves your credit score, and provides financial flexibility. Therefore, this statement is false.
3) "When shopping for a loan, you need to compare only APRs."
While comparing Annual Percentage Rates (APRs) is important when shopping for a loan, it is not the only factor to consider. Other factors to consider include interest rates, loan terms, fees, prepayment penalties, and repayment options. It is essential to compare all these factors to make an informed decision. Therefore, this statement is false.
4) "You can save money by making the smallest down payment the lender will allow."
Making the smallest down payment permitted by the lender might allow you to keep more cash in hand upfront, but it can lead to certain disadvantages. For example, a smaller down payment typically means a larger loan amount, which often results in higher interest payments over the loan term. Additionally, if the down payment is less than 20% of the property's value, it may require you to pay for private mortgage insurance (PMI), further increasing your expenses. Therefore, this statement is false.
Based on the explanations, the statement that is true is: "The more you owe, the higher your interest payment will be."