Question

What does the value of collateral or down payment affect? Check all that apply.

the amount borrowed
the interest rate
the lender’s perceived risk
the repayment schedule
the credit cards available

Answer 1

Correct choices:
- the amount borrowed — Yes. A larger down payment or more valuable collateral reduces how much you need to borrow and can raise the maximum loan size a lender will offer (via LTV limits).
- the interest rate — Yes. More collateral / a bigger down payment lowers lender risk, which often leads to lower interest rates.
- the lender’s perceived risk — Yes. Collateral and down payments reduce the lender’s exposure and so reduce perceived risk.

Not affected (generally):
- the repayment schedule — No, not directly. Repayment timing/term is set by the loan agreement; collateral/down payment may influence available terms but don’t automatically change the schedule.
- the credit cards available — No, not directly. Credit card offers depend on credit history and score; only secured cards use collateral (security deposit) to set a limit.