Management Notes

Reference Notes for Management

How are mortgage and auto loans similar

How are mortgage and auto loans similar

A. The loan is issued by the seller.
B. Money is given to the borrower monthly.
C. Interest rates are rarely charged.
D. The item purchased is used as collateral.

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The Correct Answer for the given question is option D. The item purchased is used as collateral.

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Answer Explanation for Question: How are mortgage and auto loans similar

A mortgage is a loan used to purchase or maintain a house, land, or other type of real estate. Borrowers typically pay the lender in regular installments divided into principal and interest, usually over time. The collateral serves as collateral for the loan. Real estate is bought with mortgages by individuals and businesses without having to pay the entire purchase price up front. Loans are repaid with interest over a specified number of years until the borrower owns the property free and clear.

An auto loan allows a person to borrow money for the purchase of a car or truck. Most auto loans are simple-interest loans that are repaid over a period of three or five years. Loans for autos are simple-interest loans, where the lender expects the borrower to repay the loan amount (the principal), plus interest (the cost of borrowing from the lender, expressed as a percentage of the principal).

The similarity between mortgage and auto loan is the item purchased in it is used as collateral.

Borrowers taking a balloon payment mortgage most likely

Smirti

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