The correct answer would be option D, Repaying the loan faster.
Patricia Newton is going to buy a new car, and she needs to apply for a loan to cover the purchase. She knows she can get a loan for up to 6 years but she would prefer a shorter term loan. She selects a 4 year loan. Patricia reducing her lender's risk by Repaying the loan faster.
Explanation:
When a person takes a loan, he or she has to repay the loan at an agreed upon interest rate. The loan is paid back in installments.
It is good for the lender to get back the given amount as soon as possible. In this way, the lender has lower chances of not getting back the loan. The risk of not getting the money back is minimized.
So when Patricia Newton chooses a 4 year plan rather than choosing a 6 year plan, she is actually minimizing the lender's risk by repaying the loan faster.
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