Loan Repayment and Finance Charges Quiz
Test your knowledge on loan repayment, finance charges, interest rates, and more with this comprehensive quiz.
#1
Which of the following best describes loan repayment?
Paying back borrowed money over time, including interest and fees.
Borrowing additional money to pay off existing loans.
Delaying payment of borrowed money indefinitely.
Not paying back borrowed money.
#2
What is the purpose of finance charges?
To encourage borrowers to repay loans early.
To penalize borrowers for taking out loans.
To cover the cost of providing credit.
To prevent borrowers from accessing loans.
#3
Which of the following is NOT a type of finance charge?
Interest
Late payment fees
Principal amount
Origination fees
#4
What happens if you miss a loan repayment?
Your credit score goes up.
You receive a discount on your next payment.
You may incur late fees and damage your credit score.
You are exempt from any penalties.
#5
What is the grace period in loan repayment?
A period during which no interest is charged on the loan.
A period during which borrowers can delay repayment without penalty.
A period after the due date during which borrowers can still make payments without penalty.
A period during which borrowers receive extra funds to repay the loan.
#6
How do fixed-rate loans differ from variable-rate loans?
Fixed-rate loans have fluctuating interest rates, while variable-rate loans have fixed rates.
Fixed-rate loans have a constant interest rate, while variable-rate loans can change over time.
Fixed-rate loans have higher finance charges than variable-rate loans.
Variable-rate loans have longer repayment terms than fixed-rate loans.
#7
What is the difference between a secured loan and an unsecured loan?
A secured loan requires collateral, while an unsecured loan does not.
A secured loan has higher interest rates than an unsecured loan.
A secured loan has shorter repayment terms than an unsecured loan.
A secured loan is easier to qualify for than an unsecured loan.
#8
How does the interest rate affect loan repayment?
Higher interest rates mean lower monthly payments.
Lower interest rates mean higher total loan costs.
Interest rates have no impact on loan repayment.
Lower interest rates mean lower total loan costs.
#9
What is the purpose of an amortization schedule?
To calculate finance charges.
To determine the interest rate.
To track loan repayment over time, showing the allocation of payments between principal and interest.
To decide the loan eligibility of borrowers.
#10
What is the difference between simple interest and compound interest?
Simple interest is only applied to the principal amount, while compound interest is applied to both the principal and accumulated interest.
Simple interest is calculated more frequently than compound interest.
Compound interest is only applied to the principal amount, while simple interest is applied to both the principal and accumulated interest.
Simple interest and compound interest are the same concept.
#11
How do early repayments affect the total cost of a loan?
Early repayments increase the total cost of the loan.
Early repayments decrease the total cost of the loan.
Early repayments have no effect on the total cost of the loan.
Early repayments only affect the interest rate of the loan.
#12
What is negative amortization?
When the loan balance decreases over time.
When the loan balance remains constant.
When the loan balance increases over time.
When the loan balance becomes zero.
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