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Luis, a small business owner, takes out a house loan of $130,000 at an annual interest rate of 7%. He pays a fixed monthly installment of $2,700 toward his loan repayment. Should Luis default on the loan, the creditor has placed a lien on his house as collateral.
Which of the following statements is true about Luis' situation?
a. Luis is required to repay the principal amount but is free from paying any additional finance charges.
b. The creditor can sell Luis' house to recover any outstanding payments if Luis fails to repay the loan.
c. The creditor can sell Luis' business should he default on the payments defined by the loan agreement.
D. Luis can expect to pay more than 7% interest on his loan, especially near the end of his loan term.
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We are working on Chi-Square. I have the answer but must explain how I got it. My question is circled in the picture.
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