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vehicle and paying for it in monthly installments is an example of closedendcredit. Many bank loans are also closed-end credit arrangements.Borrowing MoneyYou will be asked many questions when you apply for a loan froman institution. Lenders want to make sure that you are a reliable candidatebefore they issue you a loan. Figure 22.1 shows some sampleapplication questions. You should shop around before borrowing moneyor buying on credit because lenders charge different rates of interest.Finding a competitive interest rate can save you a lot of money in thelong run.Truth in LendingThe Truth in Lending Act requires that lenders tell you both thefinance charge and the annual percentage rate (APR) of the loan. Withthis information you can compare the cost of a loan from differentlenders.Example 1. When shopping for a truck, Jill asked each dealershe visited what the APR would be to finance the purchase. Thefirst dealer said 7.9 percent, another dealer quoted 8.2 percent,and her bank said that it would be 12 percent. Jill went back tothe first dealer, confident that she had found the best deal whenshopping around for credit.Secured LoansA secured loan is one in which creditors obtain an interest in somethingof value, called collateral , from which they can secure paymentif you do not pay. The interest that is given to creditors is known as asecurity interest . The lender or seller who holds the security interestis known as the secured party .WHO ARE YOU?A potential lender will requireyou to answer a number ofspecific questions on a creditapplication. Why do you thinkthat a creditor would wantto know the names andaddresses of your presentand previous employers?Figure 22.1 Sample Credit Application Questionsl Amount of loan requestedl Other income and sources of other incomel Proposed use of the loanl Have you ever received credit from us?l Your name and birth datel If so, when and at which office?l Social security and driver’s license numbersl Checking account number, institution, and branchl Present and previous street addressesl Savings account number, institution, and branchl Present and previous employers and their addresses l Name of nearest relative not living with youl Present salaryl Relative’s address and telephone numberl Number and ages of dependentsl Your marital statusChapter 22: Borrowing Money and Buying on Credit 485