Question 1

If you borrow money on a single payment loan and discover you cannot pay it back when it is due you should

Accepted Answer

The answer of If you borrow money on a single...

Question 2

Bob Shockey borrowed $25,000 from his $250,000 cash value life insurance policy to send his daughter to private college.Assuming he pays interest as in accrues,if Bob dies before the debt is repaid his beneficiary will receive

Accepted Answer

The answer of Bob Shockey borrowed $25,000 from his $250,000...

Question 3

Which of the following are recommended if you loan money to a friend or relative?

Accepted Answer

All of the options listed are important when loaning money to a friend or relative. It is important to approach the situation in a business-like manner to avoid personal conflict. Charging interest if the loan is not intended to be quickly repaid will ensure that the borrower takes the loan seriously and repays it in a timely manner. Both parties should clearly understand that this is a loan and not a gift to avoid any confusion or resentment. Additionally, lending only money that can be given away will prevent financial strain or hardship in the event that the loan is not repaid.

Question 4

Credit unions lend money to qualified people who are

Accepted Answer

Credit unions are member-owned financial institutions, so they can only lend money to their members.

Question 5

When the simple interest method is used to determine finance charges,the interest is calculated based on the

Accepted Answer

The answer of When the simple interest method is used...

Question 6

Which of the following are recommended if you loan money to a friend or relative?

Accepted Answer

The answer of Which of the following are recommended if...

Question 7

The annual percentage rate (APR)on a single payment loan for $1,000 at a simple interest rate of 12% is

Accepted Answer

The answer of The annual percentage rate (APR)on a single...

Question 8

A single-payment loan is advantageous only if

Accepted Answer

A single-payment loan requires the borrower to repay the entire loan amount plus interest in one lump sum payment. This can be advantageous if the borrower has sufficient funds available to make the payment and avoid having to pay interest over a longer term. Therefore, the best choice is B because it highlights the importance of having funds available to repay the loan.

Question 9

Annual percentage rate is equivalent to

Accepted Answer

Annual percentage rate (APR) is calculated using the simple interest method, which takes into account the amount of the loan and the rate of interest charged. The other methods listed are used to calculate different aspects of a loan, such as the total cost or monthly payments, but do not directly relate to the APR.

Question 10

A single payment loan

Accepted Answer

A single payment loan, also known as a balloon loan, is a type of loan that typically matures in one year or less. It is usually unsecured by collateral and the borrower makes a single lump sum payment at the end of the loan term. It is not necessarily used to finance auto purchases and may not be provided by sales finance companies.

Question 11

Sales finance companies

Accepted Answer

Sales finance companies buy installment loans from retailers, providing them with immediate cash flow while the finance company takes on the risk of collecting payments from consumers.

Question 12

If your installment loan has a variable interest rate,

Accepted Answer

A variable interest rate means that the interest rate can change over the life of the loan, making it difficult to accurately predict the total interest you will pay on the loan.

Question 13

The highest interest rate installment loans are usually made by

Accepted Answer

Consumer finance companies typically specialize in providing loans to individuals with poor credit or who are considered high-risk borrowers, which often results in higher interest rates. Commercial banks, credit unions, savings and loan associations, and life insurance companies typically offer lower interest rates on installment loans.

Question 14

Which of the following is accurate concerning 529 college savings plans?

Accepted Answer

While contributions to 529 plans are not tax deductible on the federal level, some states offer state income tax deductions or credits. However, earnings on the contributions grow tax-free when used for qualifying educational expenses. 529 plans are considered an asset of the account owner, which means it may impact financial aid eligibility. Lastly, there are contribution limits set by each state for their respective plans.

Question 15

A loan from the cash value of your life insurance policy would be characterized by

Accepted Answer

The answer of A loan from the cash value of...

Question 16

The majority of loans made by savings and loan associations are ____ loans.

Accepted Answer

Savings and loan associations specialize in offering mortgages to homebuyers. This is because the main source of funding for these associations is from deposit accounts, which is then used to lend to borrowers for purchasing homes. Other types of loans, such as auto or education loans, are typically offered by traditional banks or credit unions. Home improvement and consolidation loans could also be offered, but typically make up a smaller portion of the loan portfolio for savings and loan associations.

Question 17

Besides the finance charge,you should also consider ____ when you shop for a consumer loan.

Accepted Answer

All of the options listed should be considered when shopping for a consumer loan. Loan maturity refers to the length of time you have to make payments. A longer loan maturity may result in lower monthly payments, but ultimately result in a higher total cost of the loan due to interest. Collateral is any property or asset the lender can seize if you don't repay the loan. This is important to consider, as it may limit your ability to sell or use that property until the loan has been repaid. Repayment penalties are fees the lender charges if you pay off the loan before maturity. This can be costly if you plan on paying off the loan early. So, it's crucial to consider all of these factors when selecting a consumer loan that best fits your needs.

Question 18

If you needed a loan to buy furniture,the lowest interest rate would usually be available from a

Accepted Answer

A credit union is typically a non-profit financial institution that is owned and operated by its members. Because they are not driven by profits, they can often offer lower interest rates than other lenders. Additionally, credit unions often offer more personalized service and may be more willing to work with borrowers who have less-than-perfect credit.

Question 19

Commercial banks generally charge lower interest rates than other lending institutions because

Accepted Answer

Commercial banks usually take only the best credit risks, which reduces their risk of default and allows them to charge lower interest rates compared to other lending institutions.

Question 20

A ____ is often a source of low-rate automobile financing on specific models of vehicles.

Accepted Answer

Captive finance companies are owned by a specific manufacturer and often offer low-rate financing on specific models of vehicles as an incentive for consumers to purchase their cars.

Quiz 7: Using Consumer Loans

If you borrow money on a single payment loan and discover you cannot pay it back when it is due you should

Bob Shockey borrowed $25,000 from his $250,000 cash value life insurance policy to send his daughter to private college.Assuming he pays interest as in accrues,if Bob dies before the debt is repaid his beneficiary will receive

Which of the following are recommended if you loan money to a friend or relative?

Credit unions lend money to qualified people who are

When the simple interest method is used to determine finance charges,the interest is calculated based on the

Which of the following are recommended if you loan money to a friend or relative?

The annual percentage rate (APR) on a single payment loan for $1,000 at a simple interest rate of 12% is

A single-payment loan is advantageous only if

Annual percentage rate is equivalent to

A single payment loan

Sales finance companies

If your installment loan has a variable interest rate,

The highest interest rate installment loans are usually made by

Which of the following is accurate concerning 529 college savings plans?

A loan from the cash value of your life insurance policy would be characterized by

The majority of loans made by savings and loan associations are ____ loans.

Besides the finance charge,you should also consider ____ when you shop for a consumer loan.

If you needed a loan to buy furniture,the lowest interest rate would usually be available from a

Commercial banks generally charge lower interest rates than other lending institutions because

A ____ is often a source of low-rate automobile financing on specific models of vehicles.