Question 1

When the interest rate on savings is lower than the interest rate on a loan, it is less expensive to use your savings to make a purchase.

Accepted Answer

A) True 
 B)False

Question 2

Commercial banks are able to charge lower interest rates than other lending institutions because:

Accepted Answer

A)  they make shorter-term loans.
B)  they usually take only the best credit risks.
C)  their depositors require higher rates.
D)  they get their funds from the money market.
E)  they make only secured loans.

Question 3

A chattel mortgage is an instrument that gives lenders title to movable personal property in the event of default.

Accepted Answer

A) True 
 B)False

Question 4

You are borrowing $5,000 at a 9% interest rate. The total finance cost will be the highest in a:

Accepted Answer

A)  24-month repayment plan.
B)  36-month repayment plan.
C)  12-month repayment plan.
D)  48-month repayment plan.
E)  3-month repayment plan.

Question 5

Loans obtained by life insurance policyholders from their insurance companies are to be repaid on the date established by the loan documents.

Accepted Answer

A) True 
 B)False

Question 6

If Liza's debt safety ratio is 15% and her monthly take-home pay is $4,500, which of the following equals her total monthly payments?

Accepted Answer

A)  $675
B)  $1,200
C)  $500
D)  $450
E)  $890

Question 7

Fixed-rate loans are desirable if interest rates are expected to fall over the course of the loan.

Accepted Answer

A) True 
 B)False

Question 8

Sales finance companies:

Accepted Answer

A)  buy installment loans from consumers.
B)  buy installment loans from retailers.
C)  sell installment loans to retailers.
D)  buy installment loans from banks.
E)  sell installment loans to banks.

Question 9

Which of the following statements regarding fixed-rate loans is true?

Accepted Answer

A)  Fixed-rate loans are preferable when interest rates are expected to rise.
B)  The cost of fixed-rate loans increases with an increase in the market interest rate.
C)  The cost of fixed-rate loans decreases with a decrease in the market interest rate.
D)  Fixed-rate loans are preferable when interest rates are expected to fall.
E)  The interest rates on fixed-rate-loans have periodic adjustment dates, at which time monthly payments are adjusted.

Question 10

Credit unions lend money to qualified people who are their:

Accepted Answer

A)  employees.
B)  members.
C)  suppliers.
D)  policyholders.
E)  stockholders.

Question 11

Only stocks can be used as collateral for personal loans.

Accepted Answer

A) True 
 B)False

Question 12

_____ loans do not have to be repaid until after you graduate from college.

Accepted Answer

A)  Direct and Perkins
B)  Direct and Parent Loans for Undergraduate Students (PLUS) 
C)  Perkins and Parent Loans for Undergraduate Students (PLUS) 
D)  Only Direct
E)  Only Perkins

Question 13

A(n) _____ loan is repaid in a series of fixed, scheduled payments rather than in a lump sum.

Accepted Answer

A)  interim
B)  single-payment
C)  installment
D)  standard
E)  consolidated

Question 14

You should consider your _____ before you take on a large consumer loan.

Accepted Answer

A)  educational qualification
B)  history of auto ownership
C)  past employment
D)  financial plans
E)  career plans

Question 15

The most common use of consumer loans is to:

Accepted Answer

A)  purchase a car.
B)  finance college education.
C)  finance a vacation.
D)  buy a house.
E)  buy furniture.

Question 16

A loan rollover means that:

Accepted Answer

A)  the loan is paid off by taking out another loan.
B)  the loan is repaid without any defaults in payments.
C)  the interest on the new loan is lower than the previous loan.
D)  the maturity period of the new loan is longer than the maturity period of the original loan.
E)  the new loan will not have any processing fees.

Question 17

A single-payment loan used to finance a purchase when the cash to be used for repayment is known to be forthcoming in the near future is a form of:

Accepted Answer

A)  collateral note.
B)  interim financing.
C)  cumulative borrowing.
D)  loan rollover.
E)  loan extension.

Question 18

A legal claim that allows creditors to liquidate loan collateral is a:

Accepted Answer

A)  loan application.
B)  note.
C)  security claim.
D)  lien.
E)  loan rollover.

Question 19

Most single-payment loans are secured by:

Accepted Answer

A)  collateral.
B)  security claims.
C)  rollover loans.
D)  finance charges.
E)  liens.

Question 20

A _____ loan is intended to help consumers who have an unhealthy credit situation caused by overusing their credit.

Accepted Answer

A)  personal
B)  single-payment
C)  buy-down
D)  consolidation
E)  standard

Exam 7: Using Consumer Loans

Commercial banks are able to charge lower interest rates than other lending institutions because:

Correct AnswerverifiedShow Answer

Only stocks can be used as collateral for personal loans.

Correct AnswerverifiedShow Answer

Fixed-rate loans are desirable if interest rates are expected to fall over the course of the loan.

Correct AnswerverifiedShow Answer

A _____ loan is intended to help consumers who have an unhealthy credit situation caused by overusing their credit.

Correct AnswerverifiedShow Answer

The most common use of consumer loans is to:

Correct AnswerverifiedShow Answer

_____ loans do not have to be repaid until after you graduate from college.

Correct AnswerverifiedShow Answer

A loan rollover means that:

Correct AnswerverifiedShow Answer

A(n) _____ loan is repaid in a series of fixed, scheduled payments rather than in a lump sum.

Correct AnswerverifiedShow Answer

Sales finance companies:

Correct AnswerverifiedShow Answer

A single-payment loan used to finance a purchase when the cash to be used for repayment is known to be forthcoming in the near future is a form of:

Correct AnswerverifiedShow Answer

Most single-payment loans are secured by:

Correct AnswerverifiedShow Answer

Which of the following statements regarding fixed-rate loans is true?

Correct AnswerverifiedShow Answer

When the interest rate on savings is lower than the interest rate on a loan, it is less expensive to use your savings to make a purchase.

Correct AnswerverifiedShow Answer

You are borrowing $5,000 at a 9% interest rate. The total finance cost will be the highest in a:

Correct AnswerverifiedShow Answer

Credit unions lend money to qualified people who are their:

Correct AnswerverifiedShow Answer

You should consider your _____ before you take on a large consumer loan.

Correct AnswerverifiedShow Answer

Loans obtained by life insurance policyholders from their insurance companies are to be repaid on the date established by the loan documents.

Correct AnswerverifiedShow Answer

A legal claim that allows creditors to liquidate loan collateral is a:

Correct AnswerverifiedShow Answer

If Liza's debt safety ratio is 15% and her monthly take-home pay is $4,500, which of the following equals her total monthly payments?

Correct AnswerverifiedShow Answer

A chattel mortgage is an instrument that gives lenders title to movable personal property in the event of default.

Correct AnswerverifiedShow Answer

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