### What is a teaser rate? - [x] A low interest rate offered to attract borrowers - [ ] A permanent interest rate on a loan - [ ] A special rate applied to delinquent loans - [ ] An interest rate that gradually decreases over time > **Explanation:** A teaser rate is a temporarily low interest rate offered to attract borrowers to loan products. This rate is usually short-term and increases to a higher rate for the remainder of the loan period. --- ### When do credit card companies typically use teaser rates? - [x] During introductory periods to attract new customers - [ ] As a penalty for late payments - [ ] For balance transfers only - [ ] For cardholders with high credit scores > **Explanation:** Credit card companies often use teaser rates as a strategy to attract new customers with low introductory interest rates, encouraging them to apply for the card initially. --- ### What often happens when the teaser rate period ends? - [ ] The loan is paid off in full - [x] The interest rate typically increases to a higher rate - [ ] The borrower receives a financial bonus - [ ] The monthly payment amount decreases > **Explanation:** When the teaser rate period ends, the loan's interest rate usually increases to a higher rate that will be applied for the remainder of the loan. --- ### How might borrowers benefit from teaser rate loans? - [x] By saving money and building valuable payment history - [ ] By securing permanent low interest rates - [ ] By avoiding any interest payments completely - [ ] By receiving cash incentives from the lender > **Explanation:** Borrowers may benefit from teaser rate loans as they can save money through the low initial interest rates and build valuable payment history during that period. --- ### What might borrowers do before the teaser rate expires? - [ ] Cancel their loan - [ ] Pay the loan off immediately - [x] Refinance to a lower rate loan - [ ] Convert the loan into a different currency > **Explanation:** Many borrowers choose to refinance their loans before the teaser rate expires and the higher interest rate kicks in, allowing them to secure better terms on their new loans. --- ### What is a common effect of teaser rates on borrowers' behavior? - [ ] Induce borrowers to avoid loans - [x] Encourage borrowers to apply for loans or credit cards - [ ] Require borrowers to pay penalties - [ ] Make borrowers stick with one lender permanently > **Explanation:** Teaser rates usually encourage borrowers to apply for loans or credit cards due to the attractive initial interest rates. --- ### Which loan phase typically includes the teaser rate? - [x] The introductory phase - [ ] The repayment phase - [ ] The delinquency phase - [ ] The final phase of the loan term > **Explanation:** Teaser rates are typically offered during the introductory phase of a loan to make it more appealing to borrowers at the beginning of the term. --- ### Why do teaser rates usually exist only for a short term? - [ ] Lenders want to minimize their administrative tasks - [ ] Legal regulations require short-term rates only - [x] Lenders offer them to attract new customers but aim to benefit from higher rates later - [ ] They are only beneficial for long-term investments > **Explanation:** Lenders offer teaser rates as a strategy to attract new customers initially, but they usually intend to benefit later from higher rates when the introductory period ends. --- ### What is an example of a product that often uses teaser rates? - [ ] Personal loans without any conditions - [x] Credit cards with low introductory interest rates - [ ] Savings accounts with fixed interest earnings - [ ] Insurance policies with lifetime coverage > **Explanation:** Credit card companies frequently use teaser rates by offering attractively low introductory interest rates to attract new customers. --- ### How might consumers handle their outstanding credit card balance before the introductory interest rate expires? - [ ] Ask the lender to extend the teaser rate - [ ] Avoid making any payments - [x] Transfer the balance to a lower rate card - [ ] Ignore the changes in interest rates > **Explanation:** Many consumers transfer their outstanding credit card balances to another card with a lower rate before the introductory interest rate on their current card expires. --- ### How does a teaser rate affect monthly loan payments initially? - [x] It makes them lower compared to the payments after the rate increases - [ ] It makes them higher than those usually found with similar loans - [ ] It makes no difference to the payment amounts - [ ] It causes payments to vary drastically each month > **Explanation:** The initially low teaser rate results in lower monthly payments, which can be beneficial for borrowers early in the loan period. --- ### How can teaser rate loans impact a borrower’s credit score? - [ ] They have no impact on credit scores - [x] By enabling borrowers to build positive payment history if payments are made on time - [ ] They automatically improve credit scores regardless of payment history - [ ] They decrease credit scores due to frequent refinancing > **Explanation:** Borrowers may improve their credit scores by consistently making on-time payments during the teaser rate phase, thereby building a positive payment history.