#1
What is the primary function of credit?
To increase savings
To decrease spending
To borrow money
To invest in stocks
#2
What is collateral in the context of loans?
Interest rate charged on loans
Property or asset pledged as security for a loan
A type of loan that requires no repayment
A term for the total amount borrowed
#3
What is the concept of 'debt consolidation'?
Taking out multiple loans to increase debt
Combining multiple debts into a single loan
Paying off all debts at once
Transferring debt to another person
#4
Which of the following statements about payday loans is true?
Payday loans typically have low interest rates
Payday loans are long-term financial solutions
Payday loans are typically repaid on the borrower's next payday
Payday loans do not require any fees
#5
Which of the following loans typically requires the highest credit score?
Mortgage loan
Personal loan
Auto loan
Payday loan
#6
Which of the following is a type of mortgage loan that offers a fixed interest rate and monthly payments over the life of the loan?
Adjustable-rate mortgage (ARM)
FHA loan
VA loan
Conventional fixed-rate mortgage
#7
Which of the following factors is NOT typically considered by lenders when evaluating a borrower's creditworthiness?
Credit score
Income level
Marital status
Debt-to-income ratio
#8
What is the difference between a secured loan and an unsecured loan?
Secured loans have lower interest rates
Unsecured loans require collateral
Secured loans are riskier for borrowers
Unsecured loans are backed by assets
#9
What is the meaning of 'APR' in the context of loans?
Annual Payment Rate
Annual Percentage Rate
Average Payment Return
Average Percentage Return
#10
Which of the following is NOT a type of credit card?
Balance transfer card
Secured card
Installment card
Rewards card
#11
What is the term used to describe a situation where a borrower fails to make scheduled loan payments?
Credit scoring
Foreclosure
Default
Bankruptcy
#12
What does the 'loan-to-value ratio' (LTV) represent?
The ratio of the borrower's income to the loan amount
The ratio of the loan amount to the value of the collateral
The ratio of the loan amount to the borrower's assets
The ratio of the loan amount to the borrower's credit score
#13
What is the term used to describe the process of evaluating a borrower's creditworthiness?
Credit evaluation
Credit assessment
Credit analysis
Credit scoring
#14
What is the 'prime rate'?
The highest interest rate charged by lenders
The lowest interest rate charged by lenders
The interest rate offered to borrowers with excellent credit
The interest rate banks charge their most creditworthy customers
#15
What is 'loan amortization'?
A type of loan that requires no repayment
The process of spreading loan payments over time
A loan that requires payment of both principal and interest at once
The maximum amount a borrower can borrow
#16
What is the purpose of a 'grace period' in loans?
To extend the loan term
To provide a period of time before interest accrues
To increase the interest rate
To reduce the monthly payment amount
#17
In the context of loans, what is 'refinancing'?
Obtaining a new loan to pay off an existing loan
Extending the term of the loan
Increasing the interest rate on a loan
Paying off the loan early
#18
What is the difference between a fixed-rate loan and a variable-rate loan?
Fixed-rate loans have a lower interest rate
Variable-rate loans have a constant interest rate
Fixed-rate loans have a constant interest rate
Variable-rate loans have a fixed term
#19
What does 'co-signing' a loan mean?
Borrowing money jointly with another person
Agreeing to repay the loan if the borrower defaults
Obtaining a loan with no collateral
Paying off the loan in installments
#20
What is a 'prepayment penalty'?
A fee charged for paying off a loan early
An additional payment made before the due date
A discount for paying off a loan on time
An interest rate reduction for making extra payments