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Exam 7: Using Consumer Loans

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Question 41

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Rebates are often more cost-effective than the 0% annual percentage rate (APR) loans offered on automobile loans.

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Question 42

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

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

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Question 43

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INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. When taking inventory of your consumer debt, [ include | do not include ] your home mortgage.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. You are borrowing $5,000 at an interest rate of 9%. You may choose a 24- or 36-month repayment plan. The total finance cost will be higher with the [ 24-month | 36-month ] plan.

Most single-payment loans are secured by:

The Rule of 78s is used to calculate the _____ when an installment loan is paid off early.

It is better to use your savings instead of borrowing to make a purchase when:

Ideally, you should take inventory of the consumer debt you have outstanding once a year.

Which of the following statements regarding loan maturity is true?

A single-payment loan is advantageous to a borrower only if:

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

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 the installment loan will be the:

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. The chief danger in life insurance loans is that they have [ short maturity dates | high interest rates ].

Which of the following sources of consumer loans often has the most favorable terms for borrowers?

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

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. The interest paid on a student loan [ is sometimes | is not ] tax deductible.

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

The rate of interest charged on _____ loans changes periodically in keeping with prevailing market conditions.

The cash value of some types of life insurance policies can be used as collateral for loans.

The most common use of consumer loans is to finance: