In August 2021, which type of consumer loan had the HIGHEST interest rate?

Question

BlackTom AI · Accepted Answer

The question asks: In August 2021, which type of consumer loan had the HIGHEST interest rate?

The provided answer indicates: Credit cards (14.5%). This implies that among typical consumer loans, credit cards carried the highest APR in that period.

To evaluate this, consider how different loan types are generally priced. Credit card APRs are often set higher because:
- Revolving credit carries more ongoing risk for lenders since the balance can be carried from month to month, increasing exposure if the borrower misses payments.
- Card issuers frequently apply penalty and cash advance rates that can push average APR higher for many users.
- The credit card market historically features higher unsecured lending compared to secured loans like auto loans or mortgages, which lowers their average rates.

In contrast, other common consumer loan categories typically have lower APRs:
- Auto loans are secured by the vehicle, usually resulting in lower rates due to collateral and shorter terms.
- Personal loans, while unsecured, often have moderate rates that are lower than many credit cards but higher than secured auto loans, depending on creditworthiness and terms.
- Mortgage loans tend to have some of the lowest APRs among consumer loans due to long terms and secured status.

However, the question requires identifying the single type with the highest rate in August 2021, and the supplied answer specifies credit cards at 14.5%. This aligns with general knowledge that, on average, credit card APRs exceed other consumer loan APRs.

If there were multiple options, the critical check would be to compare typical APR ranges for each category during that specific month, noting that individual rates vary by issuer, credit score, loan terms, and promotional offers.

Given the absence of other answer choices in the data provided, the reasoning rests on the established pattern that unsecured revolving credit (credit cards) tends to have the highest APR among common consumer loans, making the stated option plausible for August 2021.

BU.231.710.51.FA25 PoP Quiz - 1 (Week 4)

In August 2021, which type of consumer loan had the HIGHEST interest rate?

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BU.231.710.51.FA25 PoP Quiz - 1 (Week 4)

In August 2021, which type of consumer loan had the HIGHEST interest rate?

View Explanation

Log in for full answers

Similar Questions

Question at position 17 In exchange for partial payment of a property’s income, a lender would most likely offer a higher interest rate?TrueFalse

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