#1
Which of the following is a common type of consumer loan?
Mortgage
ExplanationA loan for purchasing real estate.
#2
What does APR stand for in the context of consumer loans?
Annual Percentage Rate
ExplanationThe annual cost of borrowing, including interest and fees.
#3
What is the term for the total amount of money borrowed in a consumer loan?
Principal
ExplanationThe initial amount borrowed, excluding interest and fees.
#4
Which of the following is a common type of consumer loan designed to finance the purchase of a vehicle?
Auto loan
ExplanationA loan specifically for purchasing a vehicle.
#5
What is the typical range of loan terms for consumer loans?
1-5 years
ExplanationCommon duration for consumer loans, varying by type and amount.
#6
Which of the following is NOT typically considered a factor in assessing a borrower's creditworthiness?
Number of social media followers
ExplanationSocial media presence is not a standard factor in credit assessment.
#7
What is the term for a loan that is secured by collateral?
Secured loan
ExplanationA loan backed by assets, reducing risk for the lender.
#8
What is the purpose of a grace period in a consumer loan?
To allow for late payments without penalty
ExplanationA period where late payments do not incur penalties.
#9
Which of the following is a characteristic of a fixed-rate loan?
Interest rate remains constant
ExplanationThe interest rate does not change over the loan term.
#10
What is the term for the process of evaluating a borrower's creditworthiness and ability to repay a loan?
Underwriting
ExplanationAssessment of a borrower's financial risk and creditworthiness.
#11
What is a balloon payment in the context of consumer loans?
A large final payment at the end of the loan term
ExplanationA lump sum payment required at the end of certain loan terms.
#12
What is debt consolidation in the context of consumer loans?
Taking out a new loan to pay off multiple existing debts
ExplanationCombining multiple debts into a single loan for easier management.
#13
What is the primary difference between a secured loan and an unsecured loan?
Collateral requirement
ExplanationSecured loans require collateral, while unsecured loans do not.
#14
In the context of consumer loans, what is the role of a cosigner?
To share responsibility for repaying the loan
ExplanationAssuming responsibility for loan repayment if the primary borrower defaults.
#15
In the context of consumer loans, what is the meaning of 'prepayment penalty'?
A fee charged for paying off a loan early
ExplanationA charge for settling a loan before the agreed-upon term.