Consumer Loans and Lending Practices Quiz

Take this quiz to understand consumer lending, loan types, APR, credit scores, regulations, and more. Test your consumer loan expertise now!

Practice Learn Test

Which of the following is a common type of consumer loan?

Mortgage

Venture capital

Commercial paper

Corporate bond

What is the purpose of a credit score in the context of consumer loans?

To determine the borrower's creditworthiness

To set interest rates

To calculate loan duration

To verify employment history

Which of the following is NOT a common type of consumer loan?

Payday loan

Student loan

Corporate bond

Personal loan

What does it mean if a loan has a 'grace period'?

The loan has a lower interest rate

The borrower has a specified period before they must begin making payments

The loan requires collateral

The loan has flexible repayment terms

What is 'loan default'?

The process of repaying a loan in full before the scheduled maturity date

The failure to make timely payments on a loan according to the terms of the agreement

The process of transferring a loan to a third party

The process of obtaining a loan from a financial institution

Which of the following factors typically affects a borrower's credit score?

Loan origination fee

Marital status

Length of credit history

Employment status

What is 'loan origination fee'?

The fee charged by a lender for processing a loan application

The interest rate applied to a loan

The fee charged for late payment on a loan

The fee charged for early repayment of a loan

Which federal agency regulates consumer lending practices in the United States?

Federal Reserve

Federal Trade Commission

Consumer Financial Protection Bureau

Securities and Exchange Commission

What is the 'Annual Percentage Rate (APR)' in a loan agreement?

The total amount of interest paid over the loan term

The interest rate plus any additional fees expressed as a yearly rate

The principal amount borrowed

The monthly payment amount

#10

What is the difference between a secured loan and an unsecured loan?

Secured loans have lower interest rates than unsecured loans.

Secured loans require collateral, while unsecured loans do not.

Unsecured loans have fixed interest rates, while secured loans have variable rates.

Secured loans are only available to individuals with excellent credit scores.

#11

What is the debt-to-income ratio used for in the context of consumer loans?

To determine the borrower's annual income

To assess the borrower's ability to manage additional debt

To calculate the loan origination fee

To determine the loan duration

#12

In the context of auto loans, what is 'gap insurance'?

Insurance that covers the gap between the car's value and the amount owed on the loan

Insurance that covers the gap between the car's purchase price and the resale value

Insurance that covers the gap between the car's mileage and the expected mileage

Insurance that covers the gap between the car's down payment and monthly payments

#13

What is 'loan amortization'?

The process of obtaining a loan from a bank

The process of paying off a loan over time through regular payments

The process of refinancing a loan at a lower interest rate

The process of selling a loan to a third party

#14

What is the role of a cosigner in a loan agreement?

To provide collateral for the loan

To share responsibility for repaying the loan if the primary borrower defaults

To negotiate the terms of the loan with the lender

To receive a portion of the loan proceeds

#15

What is 'predatory lending'?

Lending to individuals with excellent credit scores

Lending practices that exploit borrowers through deceptive or unfair means

Lending to small businesses

Lending at prime interest rates