Question

Harold and Elaina are being considered for a car loan. The banker looks at their creditworthiness because he wants to be sure the bank will get the loan payments on time and that the loan will be paid back in full. The table below summarizes the information that was on their applications.


Application information
Questions
Harold
Elaina
How many years have you had your job?
3
7
What is your monthly salary?
$2,600
$2,250
How many credit cards do you have?
2
6
How much debt do you have?
$3,000
$12,000
How many times were you late with payments on credit cards in the past year?
1
8

Who will get the better loan rate from the banker and why?
Elaina because she has more credit cards available to her.
Elaina because she has had her job longer, which makes her look more stable.
Harold because he makes more money per month.
Harold because he pays his bills on time and does not have too much debt compared to his income.

Answer 1

Harold because he pays his bills on time and does not have too much debt compared to his income.

Explanation: Harold has fewer late payments (1 vs 8), much lower debt ($3,000 vs $12,000), and a higher monthly salary — all of which make him more likely to make timely payments and repay the loan. Elaina’s many late payments and high debt burden are bigger risks despite longer job tenure.