Name: _______________________
Consumer Loan
Test Review
1. A loan involving a formal contract detailing exactly how much you’re borrowing and when and
how you’re going to pay it back is called _______________________.
a. Loan contract
b. Mortgage loan
c. Consumer loan
d. Individual loan
2. This loan is paid back in a single lump-sum at maturity.
a. Variable-rate Loan
b. Balloon Loan
c. Installment Loan
d. Secured Loan
3. This clause states that if the borrower misses one payment, the entire loan comes due
immediately.
a. Acceleration Clause
b. Insurance Agreement Clause
c. Deficiency Payments Clause
d. Recourse Clause
4. These loans are given based on financial need to students making satisfactory progress in a
degree program.
a. Stafford Loans
b. Student Loans
c. PLUS Loans
d. All of the above.
5. One advantage of this loan is the interest paid is tax deductible.
a. Consumer Loan
b. Automobile Loan
c. Secured Loan
d. Home Equity Loan
6. Which of the following is not a loan characteristic discussed in class.
a. Secured loan
b. Balloon loan
c. Variable rate loan
d. Early payment
7. A loan in which the interest rate does not stay fixed but varies based on the market interest rate.
a. Discount rate
b. Secured rate
c. Variable rate
d. Fixed rate
8. What type of loan is considered “planned borrowing”?
a. Secured Loan
b. Consumer Loan
c. Unsecured Loan
d. Variable Rate Loan
9. The failure of a borrower to make a scheduled interest or principal payment.
a. Acceleration Clause
b. Note
c. Security Agreement
d. Default
Name: _______________________
10. A loan where an automobile is used as collateral against the loan.
a. Balloon Loan
b. Stafford Loan
c. Insurance Agreement Clause
d. Automobile Loan
11. What two factors are used to calculate the debt limit ratio?
a. Total monthly taxes and monthly take-home pay
b. Total monthly gross pay and mortgage payment
c. Total monthly take-home pay and nonmortgage debts
d. Monthly mortgage and monthly debts
12. A variable-rate loan that can be changed into a fixed-rate loan at the borrower’s option at
specified dates in the future is called ____________.
a. Changed Loan
b. Converted Loan
c. Variable to Fixed Loan
d. Convertible Loan
13. ___________________ is used by 70% of those filing for bankruptcy.
a. Chapter 3
b. Chapter 7
c. Chapter 12
d. Chapter 13
14. To file for this type of bankruptcy you must have a regular income and are given a repayment
schedule so that you can cover normal expenses and still make the repayments required.
a. Chapter 7
b. Chapter 12
c. Chapter 11
d. Chapter 13
15. According to the debt resolution rule, what is the time frame for repayment of short-term debt?
a. 2 years
b. 4 years
c. 7 years
d. 10 years
16. A trained professional specializing in developing personal budgets and debt repayments programs
is called ________________________.
a. Loan Specialist
b. Loan Officer
c. Budget Analyst
d. Credit Counselor
17. The inability to repay your debts
a. Bankruptcy
b. Financially unable
c. Credit user
d. Charged-off
18. Describe a payday loan. What are the disadvantages of this type of loan?
Name: _______________________
19. Noel and Herman need to replace her car. But with the furniture and appliance payments, the
credit card bills, and another car payment, they are uncertain if they can afford another payment.
Current payments total $475 of their $2800 combined monthly take-home pay. Calculate the debt
limit ratio and help them decide about the car purchase. Based on the debt limit ratio should they
buy a new car or not? Explain.
20. List two inexpensive sources of funds. List two most expensive sources of funds.
21. What is the formula for simple interest? If $10,000 were borrowed for 6 months at an interest
rate of 12 percent, how much would you pay in interest?
22. Define loan amortization.
23. What is the prime rate?
24. Calculate the following, Jane has the following nonmortgage bills:
Appliance payments: $90
Credit Card bills:
$100
Car payment:
$200
Furniture payments:
$45
Jane’s monthly take home pay is $3200. Calculate the debt limit ratio.