Question

As the game says, most borrowers only pay attention to the monthly payment when taking out a loan.

A) Why do you think this is?
B) How can this benefit the lender (person giving out the loan to the borrower)?

Answer 1

Borrowers often focus on the monthly payment when taking out a loan, which is the most immediate aspect of the loan repayment. However, considering other factors such as interest rates and loan terms is crucial.

Step-by-step explanation:

Many borrowers only pay attention to the monthly payment when taking out a loan because it is the most immediate and tangible aspect of the loan repayment. It is easier for borrowers to budget and plan their finances based on the monthly payment amount. However, it is important for borrowers to consider other factors such as interest rates, loan terms, and total cost of the loan in order to make an informed decision.

This focus on monthly payment benefits the lender because it can influence the borrower's perception of affordability. By emphasizing a lower monthly payment, lenders can attract more borrowers and make the loan seem more affordable. This can increase the demand for loans and allow lenders to charge higher interest rates or fees, thereby maximizing their profits.