#1
What does APR stand for in the context of loans?
Annual Percentage Rate
ExplanationThe yearly cost of borrowing, including interest and fees.
#2
Which of the following types of loans typically have the lowest interest rates?
Mortgages
ExplanationLoans secured by real estate property.
#3
What is the term used to describe the amount of money borrowed from a lender?
Principal
ExplanationThe initial loan amount.
#4
What is the difference between secured and unsecured loans?
Secured loans require collateral, while unsecured loans do not.
ExplanationSecured loans are backed by assets, while unsecured loans are not.
#5
What is the debt-to-income ratio?
The ratio of debt to income
ExplanationA measure of financial health, indicating the portion of income used for debt repayment.
#6
Which of the following factors typically affects the interest rate on a loan?
All of the above
ExplanationCredit score, loan amount, loan term, and economic factors.
#7
What is loan amortization?
The process of paying off a loan with a fixed repayment schedule in regular installments over time.
ExplanationGradually reducing the loan balance through scheduled payments.
#8
What is a balloon payment?
A large, lump-sum payment made at the end of a loan term
ExplanationA final payment substantially higher than preceding ones.
#9
What is the difference between a fixed-rate loan and an adjustable-rate loan?
Fixed-rate loans have a fixed interest rate, while adjustable-rate loans have a fluctuating interest rate.
ExplanationInterest rate stability versus potential rate changes.
#10
What is loan forbearance?
The process of temporarily pausing or reducing loan payments
ExplanationTemporary relief from making loan payments.