Understanding Consumer Credit Quiz

Student loans are a type of credit extended to students to finance education expenses.

Consumer credit is commonly used to buy goods and services, providing immediate access while deferring full payment.

Credit cards often come with high-interest rates on outstanding balances, which can lead to substantial debt if not managed carefully.

APR represents the total cost of borrowing over a year, encompassing both interest and fees associated with the loan or credit.

Credit reports compile information about an individual's credit history, including payment patterns and debt management, which lenders use to evaluate creditworthiness.

Government bonds are financial instruments issued by governments and are not typically considered consumer credit.

The grace period is a period after a credit card statement's closing date, during which cardholders can pay off their balance without incurring interest on new purchases.

A credit limit is the maximum amount of credit a lender is willing to extend to a borrower, dictating the highest balance the borrower can carry on their account.

Educational background is generally not a factor in assessing creditworthiness; instead, factors like payment history, debt level, and income are considered.

Credit utilization ratio is the proportion of a person's available credit that they are currently using, reflecting their level of indebtedness relative to their credit limits.

The length of a person's credit history is a crucial factor in determining credit scores, as it provides insight into their borrowing and repayment behavior over time.

Installment credit involves borrowing a fixed amount with set payments over a specified period, whereas revolving credit allows borrowing up to a certain limit with variable payments and no fixed end date.

Default occurs when a borrower fails to meet the agreed-upon terms of a loan, typically by missing payments or failing to fulfill other obligations.

Predatory lending involves offering loans with exploitative terms, often targeting vulnerable borrowers, and can lead to financial harm and predatory debt traps.