Question 1

The highest interest rate installment loans are usually made by

Accepted Answer

A)   consumer finance companies.
B)   commercial banks.
C)   credit unions.
D)   savings and loan associations.
E)   life insurance companies.F) B) and D)
G) A) and B)

Question 2

Generally,collateral for an installment loan may be seized and liquidated by the lender if the borrower has paid the loan in full.

Accepted Answer

A) True 
 B)False

Question 3

The student loans with the lowest rates of interest and the best loan terms are the PLUS loans.

Accepted Answer

A) True 
 B)False

Question 4

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-Consolidation loans are generally [inexpensive | expensive].

Accepted Answer

A)  for the first item
B)  for the second item
C)  if neither item will correctly complete the statement.D) None of the above
E) A) and C)

Question 5

A(n) ____ clause gives the lender legal recourse in collecting the debt if the borrower does not pay.

Accepted Answer

A)   add-on
B)   sales
C)   acceleration
D)   garnishment
E)   balloonF) A) and E)
G) A) and D)

Question 6

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-[Interim financing | Single-payment loan] is used in situations where the funds to be used for repayment are known to be forthcoming.

Accepted Answer

A)  for the first item
B)  for the second item
C)  if neither item will correctly complete the statement.D) None of the above
E) All of the above

Question 7

PLUS loans are made to parents or legal guardians rather than to the student.

Accepted Answer

A) True 
 B)False

Question 8

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-The best loan rates for consumer loans are usually from [savings and loan associations | consumer finance companies].

Accepted Answer

A)  for the first item
B)  for the second item
C)  if neither item will correctly complete the statement.D) A) and B)
E) A) and C)

Question 9

When simple interest is used,the stated rate of interest on single payment loans is equal to the annual percentage rate (APR).

Accepted Answer

A) True 
 B)False

Question 10

Consumer loans are most commonly used to obtain durable goods.

Accepted Answer

A) True 
 B)False

Question 11

Consumer loans,like open account credit,result from a rather informal process.

Accepted Answer

A) True 
 B)False

Question 12

Jamie is going to buy some furniture with a single payment loan that is discounted.The loan will be for $5,000 for 2 years at 10% interest.Calculate the APR on this loan.

Accepted Answer

Finance charge = $5,000 * .10 ...

Question 13

You want to borrow $1,000 at an interest rate of 10%.The most expensive method of calculating the dollar cost of the interest on this installment loan will be the

Accepted Answer

A)   add-on method.
B)   double declining balance method.
C)   discount method.
D)   simple interest method.
E)   past-due balance method.F) A) and D)
G) C) and D)

Question 14

Home equity loans are similar to other installment loans except

Accepted Answer

A)   interest rates are generally higher.
B)   the interest paid is generally tax deductible.
C)   no home equity is required.
D)   they are typically unsecured debts.
E)   a and cF) A) and B)
G) A) and C)

Question 15

GMAC is an example of a captive sales finance company.

Accepted Answer

A) True 
 B)False

Question 16

The primary type of loan made by a savings and loan association is the long-term installment loan used for the purchase of a home.

Accepted Answer

A) True 
 B)False

Question 17

Annual percentage rate is equivalent to

Accepted Answer

A)   dollar cost of credit method.
B)   discount method.
C)   average loan balance method.
D)   add-on method.
E)   simple interest method.F) A) and E)
G) B) and C)

Question 18

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-Loan repayment of a [PLUS | Stafford] loan would begin a month after the loan is received.

Accepted Answer

A)  for the first item
B)  for the second item
C)  if neither item will correctly complete the statement.D) All of the above
E) A) and C)

Question 19

The purchase of credit life insurance is highly recommended by most financial planning experts.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)   loan.
B)   note.
C)   security claim.
D)   lien.
E)   none of theseF) A) and B)
G) B) and E)

Exam 7: Using Consumer Loans

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -The best loan rates for consumer loans are usually from [savings and loan associations | consumer finance companies].

Correct AnswerverifiedShow Answer

Jamie is going to buy some furniture with a single payment loan that is discounted.The loan will be for $5,000 for 2 years at 10% interest.Calculate the APR on this loan.

Correct AnswerverifiedFinance charge = $5,000 * .10 ...View AnswerShow Answer

You want to borrow $1,000 at an interest rate of 10%.The most expensive method of calculating the dollar cost of the interest on this installment loan will be the

Correct AnswerverifiedShow Answer

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Loan repayment of a [PLUS | Stafford] loan would begin a month after the loan is received.

Correct AnswerverifiedShow Answer

The purchase of credit life insurance is highly recommended by most financial planning experts.

Correct AnswerverifiedShow Answer

The primary type of loan made by a savings and loan association is the long-term installment loan used for the purchase of a home.

Correct AnswerverifiedShow Answer

Consumer loans,like open account credit,result from a rather informal process.

Correct AnswerverifiedShow Answer

The highest interest rate installment loans are usually made by

Correct AnswerverifiedShow Answer

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -[Interim financing | Single-payment loan] is used in situations where the funds to be used for repayment are known to be forthcoming.

Correct AnswerverifiedShow Answer

Annual percentage rate is equivalent to

Correct AnswerverifiedShow Answer

GMAC is an example of a captive sales finance company.

Correct AnswerverifiedShow Answer

PLUS loans are made to parents or legal guardians rather than to the student.

Correct AnswerverifiedShow Answer

Home equity loans are similar to other installment loans except

Correct AnswerverifiedShow Answer

Generally,collateral for an installment loan may be seized and liquidated by the lender if the borrower has paid the loan in full.

Correct AnswerverifiedShow Answer

A(n) ____ clause gives the lender legal recourse in collecting the debt if the borrower does not pay.

Correct AnswerverifiedShow Answer

Consumer loans are most commonly used to obtain durable goods.

Correct AnswerverifiedShow Answer

The student loans with the lowest rates of interest and the best loan terms are the PLUS loans.

Correct AnswerverifiedShow Answer

When simple interest is used,the stated rate of interest on single payment loans is equal to the annual percentage rate (APR).

Correct AnswerverifiedShow Answer

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Consolidation loans are generally [inexpensive | expensive].

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Finance charge = $5,000 * .10 ...
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