Unit 21 Flashcards
What does APRC stand for?
Annual Percentage Rate of Charge
What is the first step in the APRC ladder?
Capped
In the Capped step, how is the rate managed?
The rate is capped and rises early.
True or False: The Capped step allows for unlimited rate increases.
False
What happens to the interest rate during the Capped step?
It rises early but is limited by a cap.
What is the primary feature of the Variable step in APRC?
The interest rate can fluctuate over time.
Fill in the blank: The Capped step is followed by the ______ step.
Variable
Which step in the APRC ladder typically offers the most predictability?
Capped
What happens after the Capped step in the APRC ladder?
The rate transitions to the Variable step.
True or False: The Variable step guarantees a fixed interest rate.
False
What is the potential risk associated with the Variable step?
Interest rates may increase, leading to higher payments.
What is the purpose of capping the rate in the Capped step?
To protect borrowers from excessive rate increases.
What type of borrowers may prefer the Capped step?
Those seeking stability in their payments.
After the Variable step, what is the next phase in the APRC ladder?
The next phases may vary based on the specific product.
True or False: The Capped step is designed for long-term stability.
True
What does a ‘cap’ refer to in the context of the Capped step?
A limit on how high the interest rate can rise.
Multiple Choice: Which of the following best describes the Capped step? A) Unlimited increases B) Fixed rate C) Rate limited by a cap
C) Rate limited by a cap
How do borrowers benefit from the Capped step?
They have predictability and protection against high rates.
What is a common concern with the Variable step?
Uncertainty in future payments due to rate fluctuations.
True or False: The Capped step can lead to lower initial payments.
True
What is a key characteristic of the Variable interest rate?
It changes based on market conditions.
Which step in the APRC ladder is often more appealing to risk-averse borrowers?
Capped
What is one potential advantage of the Variable step?
It may offer lower rates if market conditions improve.
Fill in the blank: The APRC ladder consists of ______ primary steps.
Four
What should borrowers consider when choosing between Capped and Variable steps?
Their risk tolerance and financial situation.
