23. Scott and Eric are young men. Each has a good credit history. They work at the same company and make approximately the same salary. Scott has borrowed $6,000 to take a foreign vacation. Eric has borrowed $6,000 to buy a car. Who is likely to pay the lowest finance charge?
a.) Eric will pay less because the car is collateral for the loan. Collateral is a multi-syllable word for ³the lender has an asset that they can take back, in the event of a default on the borrowerıs part². As long as there is some real asset that the bank can lay their hands on should you not be able to pay what you owe, they will give you a discount on the interest rate.
However, you get additional rate breaks if you have a good credit score. One of the easiest ways to achieve a good score: always pay your bills and pay them on time. All of your bills.
b.) They will both pay the same because the rate is set by law.
c.) Scott will pay less because people who travel overseas are better risks.
d.) They will both pay the same because they have almost identical financial backgrounds.
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