#1
Which of the following best describes the term 'credit'?
An arrangement to receive goods or services now and pay for them later
ExplanationCredit involves receiving goods/services immediately and paying for them later.
#2
What is the purpose of a credit report?
To provide a summary of one's credit history
ExplanationCredit reports offer a summary of an individual's credit history.
#3
What is the term for the maximum amount of credit a lender is willing to extend to a borrower?
Credit limit
ExplanationCredit limit is the maximum amount a lender allows a borrower to access.
#4
What is the term used to describe the process of borrowing money to invest?
Leveraging
ExplanationLeveraging is borrowing funds to invest for potentially higher returns.
#5
Which of the following is an example of revolving credit?
Credit card
ExplanationCredit cards are a form of revolving credit.
#6
What does APR stand for in the context of borrowing?
Annual Percentage Rate
ExplanationAPR signifies the annualized cost of borrowing.
#7
Which of the following is NOT typically considered when determining one's credit score?
Marital status
ExplanationMarital status is usually not a factor in credit score calculations.
#8
What is the difference between secured and unsecured loans?
Secured loans require collateral while unsecured loans do not
ExplanationSecured loans necessitate collateral, unlike unsecured loans.
#9
Which of the following is an advantage of using credit cards for purchases?
Fraud protection
ExplanationCredit cards offer protection against fraudulent transactions.
#10
What does 'debt consolidation' refer to?
Paying off multiple debts with a single loan
ExplanationDebt consolidation involves repaying multiple debts with a single loan.
#11
What is the concept of 'loan-to-value ratio' (LTV) in lending?
The percentage of a property's value that can be borrowed
ExplanationLTV ratio indicates the borrowed amount relative to property value.
#12
Which of the following is NOT a factor influencing loan interest rates?
Type of employment
ExplanationEmployment type typically doesn't influence loan interest rates.
#13
In the context of mortgages, what does 'prepayment penalty' refer to?
A penalty for paying off a mortgage early
ExplanationPrepayment penalty is charged for early mortgage repayment.
#14
What is the term for a period during which borrowers are not required to make payments on their loan?
Grace period
ExplanationGrace period allows borrowers to defer loan payments temporarily.
#15
What is the term for the process of transferring an existing loan to another lender with better terms?
Loan refinance
ExplanationLoan refinance involves transferring a loan to obtain more favorable terms.