Question 1

A Chapter 13 personal bankruptcy is characterized by all of the following except

Accepted Answer

A)  you continue to pay at least a portion of most of your debts. 
B)  you maintain title and possession of your assets. 
C)  your creditors vote on restructuring your debt repayments. 
D)  a new debt repayment schedule is determined. 
E)  you get relief from harassment by bill collectors.

Question 2

Your brother, a banker, has just approved a loan for you, an add-on interest loan. You will borrow $2,000 for one year with a 12% annual interest rate. What is your monthly payment?

Accepted Answer

A)  $166.67 
B)  $186.67 
C)  $240.00 
D)  $256.78 
E)  none of the above

Question 3

A payday loan is a reasonable option if you need a luxury item like a big screen TV.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements regarding the risk-return relationship is most accurate?

Accepted Answer

A)  Lower credit scores are associated with lower APRs. 
B)  Higher credit scores are associated with lower APRs. 
C)  Longer loan length is associated with lower APRs. 
D)  Shorter loan length is associated with higher APRs. 
E)  Both B and D are correct.

Question 5

An acceleration clause states that if you default on a secured loan, not only can the lender repossess whatever is secured, but if the sale of the asset does not cover what you owe, you can also be billed for the difference.

Accepted Answer

A) True 
 B)False

Question 6

If you own a home with a market value of $175,000 and you have an outstanding balance on your mortgage of $60,000, your home equity is

Accepted Answer

A)  $57,500. 
B)  $97,750. 
C)  $115,000. 
D)  $235,000.

Question 7

Lenders tend to like to see borrowers put down large down payments for loans because this is seen as increasing the borrower's desire to pay off the loan since the borrower now has equity in the collateral.

Accepted Answer

A) True 
 B)False

Question 8

The annual percentage rate is the simple percentage cost of all finance charges over the life of the loan on an annual basis.

Accepted Answer

A) True 
 B)False

Question 9

In driving around town one day, you noticed most of the payday loan companies were located close to the college and the local military base and there were none out in the newer neighborhoods. Why do you think this is so?

Accepted Answer

A)  The rent on these locations is less expensive. 
B)  Payday lenders tend to focus on less experienced borrowers who typically don't make a lot of money. 
C)  Because their terms are so affordable people with low incomes really take advantage of them. 
D)  There are zoning laws that require these types of locations for these types of services.

Question 10

An advantage that direct or subsidized student loans have over other types of loans is

Accepted Answer

A)  the after-tax interest rates are very attractive compared with other loans. 
B)  you can borrow at a below-market rate, regardless of your credit situation. 
C)  in an emergency, you can declare bankruptcy and avoid repayment. 
D)  you have the rest of your life to pay it back. 
E)  both A and B are correct.

Question 11

Which of the following does not require you to have a good credit rating to issue you a loan?

Accepted Answer

A)  your family 
B)  savings and loan 
C)  commercial bank 
D)  All of the above require a good credit rating to issue a loan.

Question 12

A recourse clause defines whatever actions a lender can take to recover money from you in case you default on the loan.

Accepted Answer

A) True 
 B)False

Question 13

You just bought a car and borrowed $15,000 for 5 years at 8% APR. Using the simple interest method; by the time you pay off this loan your total finance costs will be closest to which of the following?

Accepted Answer

A)  $6,000 
B)  $3,249 
C)  $3,784 
D)  $1,200

Question 14

Why is the debt limit ratio and 28/36 rule more important to conservative lenders like Banks and Credit Unions and not so important for lenders like small Finance companies and Payday lenders?

Accepted Answer

The answer of Why is the debt limit ratio and...

Question 15

The finance charges for a loan may include

Accepted Answer

A)  fees for a credit check. 
B)  required insurance fees. 
C)  interest payments. 
D)  Only choices A and B. 
E)  All of the above choices.

Question 16

A balloon loan calls for repayment of both interest and principal at regular intervals, with the payment levels set so that the loan expires at a preset date.

Accepted Answer

A) True 
 B)False

Question 17

Variable-rate loans tied to long-term rates expose you to more risk of rate changes than variable-rate loans tied to short-term rates.

Accepted Answer

A) True 
 B)False

Question 18

Which of these are possible options for most people who cannot pay their bills?

Accepted Answer

A)  Get help from a credit counselor. 
B)  Obtain a debt consolidation loan. 
C)  Declare Chapter 13 personal bankruptcy. 
D)  Declare Chapter 7 personal bankruptcy. 
E)  All of the above are possible options.

Question 19

Brenda found out that reputable lenders use the 28/36 rule when determining mortgage qualification. Brenda currently grosses $6,000 per month. From this she pays a $200 car payment; a personal loan of $100 and a student loan payment of $90. Based on this information, would Brenda qualify for a mortgage?

Accepted Answer

A)  Yes 
B)  No

Question 20

Describe in detail the characteristics of the direct subsidized and unsubsidized student loans from the Federal government.

Accepted Answer

The answer of Describe in detail the characteristics of the...

Exam 7: Using Consumer Loans: The Role of Planned Borrowing

A Chapter 13 personal bankruptcy is characterized by all of the following except

Your brother, a banker, has just approved a loan for you, an add-on interest loan. You will borrow $2,000 for one year with a 12% annual interest rate. What is your monthly payment?

A payday loan is a reasonable option if you need a luxury item like a big screen TV.

Which of the following statements regarding the risk-return relationship is most accurate?

An acceleration clause states that if you default on a secured loan, not only can the lender repossess whatever is secured, but if the sale of the asset does not cover what you owe, you can also be billed for the difference.

If you own a home with a market value of $175,000 and you have an outstanding balance on your mortgage of $60,000, your home equity is

Lenders tend to like to see borrowers put down large down payments for loans because this is seen as increasing the borrower's desire to pay off the loan since the borrower now has equity in the collateral.

The annual percentage rate is the simple percentage cost of all finance charges over the life of the loan on an annual basis.

In driving around town one day, you noticed most of the payday loan companies were located close to the college and the local military base and there were none out in the newer neighborhoods. Why do you think this is so?

An advantage that direct or subsidized student loans have over other types of loans is

Which of the following does not require you to have a good credit rating to issue you a loan?

A recourse clause defines whatever actions a lender can take to recover money from you in case you default on the loan.

You just bought a car and borrowed $15,000 for 5 years at 8% APR. Using the simple interest method; by the time you pay off this loan your total finance costs will be closest to which of the following?

Why is the debt limit ratio and 28/36 rule more important to conservative lenders like Banks and Credit Unions and not so important for lenders like small Finance companies and Payday lenders?

The finance charges for a loan may include

A balloon loan calls for repayment of both interest and principal at regular intervals, with the payment levels set so that the loan expires at a preset date.

Variable-rate loans tied to long-term rates expose you to more risk of rate changes than variable-rate loans tied to short-term rates.

Which of these are possible options for most people who cannot pay their bills?

Describe in detail the characteristics of the direct subsidized and unsubsidized student loans from the Federal government.