#1
Which of the following is an example of secured debt?
Credit card debt
Student loans
Mortgage
Personal line of credit
#2
What is the primary difference between fixed-rate and variable-rate interest loans?
The total amount borrowed
The term of the loan
The interest rate
The lender's credit score requirement
#3
Which of the following is an example of unsecured debt?
Car loan
Mortgage
Personal line of credit
Home equity loan
#4
What is the purpose of a grace period in loan agreements?
To extend the loan term
To waive interest fees
To delay the start of repayment
To reduce the principal amount
#5
What is the difference between simple interest and compound interest?
Simple interest is calculated on the principal only, while compound interest is calculated on both the principal and accumulated interest.
Simple interest is calculated using a fixed annual percentage rate, while compound interest varies over time.
Simple interest is only applicable to short-term loans, while compound interest is used for long-term loans.
Simple interest is only applied to secured debts, while compound interest applies to unsecured debts.
#6
Which of the following loans typically has the lowest interest rate?
Payday loan
Personal loan
Credit card cash advance
Home mortgage loan
#7
Which of the following accurately describes compound interest?
Interest calculated only on the initial principal
Interest calculated on both the initial principal and the accumulated interest
Interest calculated only once at the end of the loan term
Interest calculated using a fixed annual percentage rate
#8
What does 'APR' stand for in the context of loans?
Annual Percentage Rate
Average Payment Rate
Adjusted Principal Ratio
Accumulated Profit Return
#9
Which of the following factors typically influences the interest rate on a loan?
Borrower's age
Loan amount
Lender's location
Borrower's favorite color
#10
What does 'debt-to-income ratio' measure?
The amount of debt compared to the borrower's assets
The amount of debt compared to the borrower's income
The amount of debt compared to the loan term
The amount of debt compared to the borrower's credit score
#11
What is the 'prime rate' in the context of loans?
The interest rate offered to borrowers with excellent credit scores
The interest rate set by the Federal Reserve
The interest rate offered to the most creditworthy borrowers
The benchmark interest rate used by banks to set interest rates for borrowers
#12
What is a 'prepayment penalty'?
A fee charged for paying off a loan early
A discount offered for paying a loan in advance
A bonus offered for making timely payments
A reward given for refinancing a loan
#13
What is the main risk associated with taking on variable-rate debt?
Fluctuating monthly payments
Fixed interest rates
Predictable payment schedule
Longer loan term
#14
In which scenario would a balloon payment be required?
At the beginning of the loan term
At the end of the loan term
During the middle of the loan term
No scenario requires a balloon payment
#15
What is the difference between a secured loan and an unsecured loan?
A secured loan requires collateral, while an unsecured loan does not require collateral.
A secured loan has a higher interest rate than an unsecured loan.
A secured loan has a shorter repayment term than an unsecured loan.
A secured loan is only available to borrowers with excellent credit scores, while an unsecured loan is available to all borrowers.
#16
What is the primary benefit of refinancing a loan?
Increasing the total interest paid over the life of the loan
Locking in a higher interest rate
Lowering monthly payments or reducing the total interest paid over the life of the loan
Having to deal with a different lender
#17
What is the primary purpose of debt consolidation?
To increase the total amount of debt
To simplify debt repayment by combining multiple debts into a single loan with a lower interest rate
To avoid paying off existing debts
To transfer debt to another person