#1
What is the typical tenure for a personal loan?
5 years
ExplanationStandard duration for repayment.
#2
In the context of personal loans, what does 'EMI' stand for?
Equated Monthly Instalment
ExplanationMonthly payment amount.
#3
What role does employment history play in personal loan approval?
Affects income verification
ExplanationVerifies repayment capability.
#4
What is the impact of pre-existing debt on personal loan eligibility?
Decreases eligibility
ExplanationIndicates higher repayment burden.
#5
How does a personal loan impact the borrower's credit score?
May temporarily lower credit score
ExplanationShort-term credit score impact.
#6
Which of the following factors is crucial for determining the interest rate on a personal loan?
All of the above
ExplanationMultiple factors influence rates.
#7
What is the difference between a secured and an unsecured personal loan?
Secured loans require collateral, while unsecured loans do not
ExplanationPresence of collateral affects loan type.
#8
What is the difference between a fixed-rate and a variable-rate personal loan?
Fixed-rate has a constant interest rate, while variable-rate can change over time
ExplanationInterest rate stability vs. fluctuation.
#9
What is the impact of a high credit score on personal loan eligibility?
Increases eligibility
ExplanationImproves chances for loan approval.
#10
How does a personal line of credit differ from a traditional personal loan?
A personal line of credit is a revolving form of credit, while a personal loan is a one-time lump sum
ExplanationContinuous credit access vs. one-time sum.
#11
What is the grace period in personal loan repayments?
A period after the due date with no penalty
ExplanationTime allowance for late payment.
#12
What is the Debt-to-Income Ratio (DTI) and why is it important in personal loan approval?
It measures the total debt payments divided by gross income
ExplanationDetermines borrower's repayment capability.
#13
How does prepayment affect the overall cost of a personal loan?
Reduces the total interest paid
ExplanationLowers total interest expense.
#14
What is the purpose of a co-borrower in a personal loan application?
To share the responsibility of loan repayment
ExplanationDistributes repayment obligation.
#15
How does a debt consolidation loan work, and when might it be beneficial?
Combines multiple debts into a single loan, often with lower interest
ExplanationSimplifies repayments and lowers rates.
#16
What is the significance of the APR (Annual Percentage Rate) in personal loans?
It represents the total cost of borrowing, including interest and fees
ExplanationOverall borrowing cost indicator.
#17
What is the concept of loan origination fees, and how do they affect the overall cost of a personal loan?
Fees charged for processing the loan application, increasing the overall cost
ExplanationAdds to total borrowing expense.