Exam 7: Using Consumer Loans

College costs have been escalating,but not as rapidly as the overall rate of inflation.

Bob Shockey borrowed $25,000 from his $250,000 cash value life insurance policy to send his daughter to private college.Assuming he pays interest as in accrues,if Bob dies before the debt is repaid his beneficiary will receive

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. -Loan repayment of a [PLUS | Stafford] loan would begin a month after the loan is received.

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

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. -Calculating interest using the [discount | simple interest] method will result in the higher APR on a single-payment loan.

Garnishment is limited in amount by the Federal Garnishment Law.

Consumer loans are often used by individuals today to purchase nondurable items.

If you needed a loan to buy furniture,the lowest interest rate would usually be available from a

A single-payment loan is advantageous only if

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 majority of single payment loans [are | are not] secured by collateral.

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. -To get a government-backed student loan,one should contact his [bank | university].

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 $1,000,APR is 10%,and the loan maturity is one year.Total interest charges will be higher if [you pay off the loan in 12 monthly installments | you make one payment in full at the end of the year].

Consumer loans are often used by individuals today.

Sales finance companies commonly purchase the retail installment contracts of businesses that sell big-ticket items such as automobiles,furniture,and appliances.

If your installment loan has a variable interest rate,

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 longer the loan maturity,the [lower | higher] the total finance costs will be.

Rebates are almost always more cost effective than the lower interest rate offered on automobile loans.

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. -Another term for a signature loan is a [secured | non-collateralized] loan.

When loaning money to a friend or family member,it is advisable to lend only the amount that you can afford to give away.

Variable rate loans are desirable if interest rates are expected to fall in the future.