Final answer:
The ad must clearly disclose the terms of multiple simple interest rates applied to a loan duration. Loan applicants can reassure banks by providing a strong credit history, collateral, and detailed repayment plans. Homeowners with adjustable-rate mortgages could benefit from decreased monthly payments if market interest rates fall due to a drop in inflation.
Step-by-step explanation:
If an advertisement states a simple annual interest rate (R) and indicates that more than one simple interest rate applies over the term of the loan, the ad must provide a clear and transparent disclosure. This means that all the terms, including any changes to the interest rate during the loan period, should be clearly outlined to prevent any confusion or misunderstanding.
Loan applicants who find themselves facing skeptical banks due to imperfect information can take several steps to increase their chances of securing a loan. They can provide a strong credit history, offer collateral, demonstrate a consistent income or stable employment history, have a co-signer with a solid financial background, and prepare a detailed plan illustrating how the loan will be utilized and repaid. By taking these actions, loan seekers can demonstrate their creditworthiness and commitment to repaying the loan, thereby reassuring the lender.
In regards to adjustable-rate mortgages (ARM), if inflation falls unexpectedly by 3%, the market interest rates are likely to fall as well. Since ARMs adjust in line with market interest rates, a homeowner with an ARM could expect their mortgage interest rate to decrease, leading to lower monthly payments compared to the original agreement. This situation contrasts with a fixed-rate mortgage, where the rate remains unchanged regardless of market fluctuations.