Question
Select the correct answer. Caleb is applying for a loan that requires no down payment. Which statement is true? A. If Caleb makes a down payment, it will lower the total cost of the loan. B. If Caleb makes a down payment, it will raise the total cost of the loan. C. If Caleb makes a down payment, it will increase the loan term. D. Making a down payment has no effect on the total cost of the loan.
Answer
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(186 Votes)
Yolanda
Veteran · Tutor for 12 years
Answer
Let's analyze each statement to determine which one is true given that Caleb is applying for a loan that requires no down payment.A. If Caleb makes a down payment, it will lower the total cost of the loan.- Making a down payment reduces the principal amount of the loan, which in turn reduces the amount of interest that will accrue over the life of the loan. Therefore, the total cost of the loan (principal plus interest) will be lower.B. If Caleb makes a down payment, it will raise the total cost of the loan.- This statement is incorrect because, as explained above, a down payment reduces the principal, which reduces the total cost due to less interest accruing.C. If Caleb makes a down payment, it will increase the loan term.- The loan term is typically determined by the agreement between the lender and the borrower and is not directly affected by the size of the down payment. A down payment might allow for more flexibility in choosing a loan term, but it does not inherently increase the term.D. Making a down payment has no effect on the total cost of the loan.- This statement is incorrect because making a down payment does affect the total cost of the loan by reducing the amount of interest paid over time.**【Answer】: The correct answer is A. If Caleb makes a down payment, it will lower the total cost of the loan.**