Deck 6: Loans and Housing Decisions

Question 1

What loan type is typically a small-dollar debt that can be used to pay bills or make purchases?

A) Payday.
B) Bank.
C) Personal.
D) Cash advance.

Answer 1

Personal.

Question 2

Approximately ________ U.S. households are unbanked or underbanked.

A) 10 million
B) 24 million
C) 34 million
D) 50 million

Answer 2

34 million

Question 3

Title loan lenders and rent-to-own retailers are examples of what type of financial system?

A) Alternative.
B) Mainstream.
C) Executive.
D) Payday lender.

Answer 3

Alternative.

Question 4

Mainstream lenders include

A) title loans.
B) rent-to-own retailers.
C) credit unions.
D) auto title loan lenders.

Question 5

What forms do personal loans generally come in?

A) Installment credit.
B) Line of credit.
C) Deposit advances.
D) All of these answer choices are correct.

Question 6

The ________ the APR, the ________ the true cost of credit.

A) lower; higher
B) lower; lower
C) higher; lower
D) None of these answer choices are correct.

Question 7

Unsecured loans are sometimes called what type of loan?

A) Payday.
B) Bank.
C) Signature.
D) Cash advance.

Question 8

Members of alternative financial systems include

A) check cashers.
B) pawn shops.
C) payday lenders.
D) All of these answer choices are correct.

Question 9

Aliah just sent an application for a loan. The loan has an annual percentage rate of 21%. What is the monthly interest rate that will apply to any unpaid balances on this loan? Assume 12 equal months.

A) 21%.
B) 11.75%.
C) 2.50%.
D) 1.75%.

Question 10

The most popular alternative loan is a(n)

A) payday loan.
B) checking account.
C) savings account.
D) emergency fund.

Question 11

Taj obtained a $1,000 loan to be paid back at the end of 1 month. The lender quoted Taj a $200 fee. Which of the following is correct regarding this loan?

A) The APR is over 240%.
B) Taj will receive $1,200.
C) The $1,000 plus finance charges will be paid at the end of 1 year.
D) All of these answer choices are correct.

Question 12

Banks and credit unions are examples of what type of financial system?

A) Alternative.
B) Mainstream.
C) Title loan lender.
D) Payday lender.

Question 13

Money set aside for unforeseen circumstances is often referred to as having a(n)

A) emergency fund.
B) savings account.
C) bank account.
D) loan.

Question 14

To receive a good rate, a good credit score is required in which of the following situations?

A) Auto loan at bank.
B) Personal loan at bank.
C) Credit card.
D) All of these answer choices are correct.

Question 15

A recent survey of U.S. households asked if they could come up with $2,000 for an unexpected expense. Approximately what percentage said that they were probably or certainly not able to come up with $2,000 in an emergency?

A) 10%.
B) 30%.
C) 50%.
D) 70%.

Question 16

What loan type is backed by collateral?

A) Secured.
B) Unsecured.
C) Payday.
D) Cash advance.

Question 17

A good credit score is typically not required when borrowing from a

A) pawn shop.
B) bank.
C) credit union.
D) credit card company.

Question 18

Mia received a loan offer in the mail. The loan has an annual percentage rate of 24%. What is the monthly interest rate that will apply to any unpaid balances on this loan? Assume 12 equal months.

A) 24%.
B) 12%.
C) 4%.
D) 2%.

Question 19

A ________ should be considered a lender of last resort.

A) bank
B) payday lender
C) credit union
D) All of these answer choices are correct.

Question 20

With what type of loan does the borrower receive the full amount of the loan up front in a single lump sum?

A) Personal loan.
B) Payday loan.
C) Installment loan.
D) Cash advance.

Question 21

What type of personal loan has the highest APR?

A) Installment loan.
B) Line of credit.
C) Deposit advance.
D) Payday loan.

Question 22

Which loan allows for consolidation of federal student loans into one loan?

A) Federal subsidized loan.
B) Federal unsubsidized loan.
C) PLUS loan.
D) Direct consolidation loan.

Question 23

What is the average fee amount for a payday loan?

A) $0.
B) $10.
C) $15.
D) $15 per $100 borrowed.

Question 24

A borrower might benefit from what program if he or she decides to work for either a nonprofit hospital or a public health organization?

A) Federal subsidized loan program.
B) Federal unsubsidized loan program.
C) Public Service Loan Forgiveness program.
D) PLUS loan program.

Question 25

Federal direct loans include which of the following?

A) Auto loans.
B) Private loans.
C) PLUS loans.
D) Deposit-advance loans.

Question 26

Which of the following federal financial aid awards does not need to be repaid?

A) Federal subsidized loan.
B) Federal work-study.
C) Direct PLUS loan.
D) Federal unsubsidized loan.

Question 27

What is the average fee amount for a deposit advance?

A) $0.
B) $10.
C) $15.
D) $10 per $100 borrowed.

Question 28

With a federal student loan, you are borrowing money from what entity?

A) A bank.
B) The federal government.
C) A credit union.
D) A payday lender.

Question 29

Which loan has no interest until 6 months after graduation as long as the student is enrolled half-time?

A) Federal subsidized loan.
B) Federal unsubsidized loan.
C) PLUS loan.
D) Private loan.

Question 30

What is the average fee amount for an installment loan?

A) $0.
B) $10.
C) $15.
D) $10 per $100 borrowed.

Question 31

Which loan repayment plan is based on annual income?

A) Standard plan.
B) Extended repayment plan.
C) Graduate repayment plan.
D) Income-sensitive repayment plan.

Question 32

Repayment of federal student loans typically occurs within what time period of completing school or dropping below half-time status as a student?

A) 6 months.
B) 9 months.
C) 1 year.
D) 2 years.

Question 33

All student borrowers are eligible for which repayment plan?

A) Graduated repayment plan.
B) Extended repayment plan.
C) Income-based repayment plan.
D) Pay as you earn repayment plan.

Question 34

What type of personal loan has a variable APR?

A) Installment loan.
B) Line of credit.
C) Deposit advance.
D) Payday loan.

Question 35

What is the average fee amount for a line of credit?

A) $0.
B) $10.
C) $25−$50 per year.
D) $10 per $100 borrowed.

Question 36

Kyle received a short-term loan that he will automatically repay with his next qualifying electronic deposit. This is an example of what type of loan?

A) Payday.
B) Deposit advance.
C) Signature.
D) Cash advance.

Question 37

A borrower must have which of the following to qualify for a deposit-advance loan?

A) A high credit score.
B) A checking account.
C) An automobile.
D) A savings account.

Question 38

The process of federal financial aid includes which of the following steps?

A) Application.
B) Award.
C) Repayment.
D) All of these answer choices are correct.

Question 39

What type of personal loan has a fixed monthly payment?

A) Installment loan.
B) Line of credit.
C) Deposit advance.
D) Payday loan.

Question 40

What type of lending allows a borrower and lender to come together via the Internet using a lending site?

A) Peer-to-peer.
B) Payday loan.
C) Line of credit.
D) Deposit advance.

Question 41

What is the first step in the vehicle purchasing process?

A) Determine your transportation needs.
B) Determine how much you can afford.
C) Consider the costs of other expenses such as gas, insurance, and maintenance.
D) Review your budget.

Question 42

When determining how much of a vehicle you can afford, what is a valid option?

A) Withdraw the money directly from savings and pay cash for the car.
B) Use a combination of cash for a down payment and borrow the remainder with a loan.
C) Borrow the entire purchase price of the car with a loan.
D) All of these answer choices are correct.

Question 43

Which loan repayment plan forgives remaining debt after 20 years of payments?

A) Graduated repayment plan.
B) Extended repayment plan.
C) Standard plan.
D) Pay as you earn repayment plan.

Question 44

Hasan wants to purchase a car. He reviewed his budget and can comfortably afford a car payment of $325 per month. He has good credit and anticipated being able to secure a 5-year loan at 3% interest. What is the maximum cost he should pay for a car to stay within his budgeted monthly amount?

A) $18,083.
B) $14,041.
C) $14,076.
D) $15,021.

Question 45

Mia wants to purchase a car. She reviewed her budget and can comfortably afford a car payment of $575 per month. She has good credit and anticipated being able to secure a 5-year loan at 2.5% interest. What is the maximum cost she should pay for a car to stay within her budgeted monthly amount?

A) $17,772.
B) $24,669.
C) $32,399.
D) $34,893.

Question 46

What is final step in the process of purchasing an automobile?

A) Determine if leasing or financing the car is best.
B) Locate the best bank and negotiate the rate.
C) Locate the best dealership and negotiate the price.
D) Shop for the cheapest auto insurance.

Question 47

An automobile is an example of a(n)

A) used asset.
B) human capital asset.
C) investment in equity.
D) liquid asset.

Question 48

Karen determined how much she could afford to spend per month in car payments. How would she shop for the lowest cost loan?

A) Negotiate the lowest annual percentage rate.
B) Negotiate the longest maturity.
C) Negotiate the smallest payment.
D) Negotiate the smallest down payment.

Question 49

Once you're preapproved for an auto loan, you can then start researching and identifying the best vehicle models. What are valid items to research?

A) Reliability and repair histories.
B) Fuel efficiency.
C) Reliability, repair histories, and fuel efficiency.
D) Repair histories.

Question 50

________ is when an asset decreases in value.

A) Appreciation
B) Depreciation
C) Maintenance
D) Leasing

Question 51

Interest begins accruing immediately for which of the following?

A) Federal unsubsidized loan.
B) PLUS loan.
C) Direct consolidation loan.
D) All of these answer choices are correct.

Question 52

Ja'Chia wants to purchase a car. She reviewed her budget and can comfortably afford a car payment of $450 per month. She has good credit and anticipated being able to secure a 4-year loan at 4% interest. What is the maximum cost she should pay for a car to stay within her budgeted monthly amount?

A) $9,538.
B) $12,067.
C) $18,076.
D) $19,930.

Question 53

Before contacting your insurance company to find out what it will cost to insure your potential new car, what information is required to receive a valid quote?

A) Year car made, manufacturer, and model.
B) Year car made, manufacturer, model, loan amount, and cost.
C) Year car made, manufacturer, model, and if leased or purchased.
D) Year car made, manufacturer, model, and cost.

Question 54

Which information is irrelevant in determining your transportation needs?

A) Researching and identifying the best model of a car.
B) Why you need a car.
C) How far you would be driving each week.
D) Access to public transportation.

Question 55

A ________ is a financial agreement between you and the dealership, where you agree to pay a certain price for the right to drive the car for a set period of time.

A) lease
B) payment
C) loan
D) right to buy

Question 56

For graduate students, payments begin immediately for which loan?

A) Private loan.
B) Federal subsidized loan.
C) Federal unsubsidized loan.
D) PLUS loan.

Question 57

How long is the repayment period for the standard plan?

A) 10 years.
B) 15 years.
C) 20 years.
D) 25 years.

Question 58

What is the key variable in negotiating an auto loan?

A) Payment.
B) Length of the loan.
C) Lowest interest rate possible.
D) Maintenance schedule.

Question 59

The key takeaway for purchasing a car is to

A) do your homework.
B) keep your options open.
C) choose the best alternative that meets your budget.
D) All of these answer choices are correct.

Question 60

Which loan is the primary form of student financial aid?

A) Private loan.
B) Federal direct loan.
C) Federal indirect loan.
D) Bank loan.

Question 61

Most individuals spend ________ of their monthly income on housing.

A) 20%−30%
B) 30%−40%
C) 30%−50%
D) 50%−60%

Question 62

________ is a special type of loan that is secured by real property.

A) A lease
B) A mortgage
C) Maintenance
D) A sublet

Question 63

________ refers to allowing someone else, not originally on the lease, to live in the home and pay rent.

A) Leasing
B) Depositing
C) Subletting
D) Evicting

Question 64

Which ratio is the sum of monthly housing payments plus all other monthly debt payments divided by total monthly income?

A) Total fixed payments-to-income.
B) Liquidity.
C) Net worth.
D) Debt-to-income.

Question 65

Shiloh just graduated from college. She accepted a position with a firm earning $961.54 per week. Using HUD guidelines, what is the maximum Shiloh should pay for rent on a monthly basis assuming she works 52 weeks per year?

A) $4,166.
B) $1,500.
C) $1,250.
D) $1,200.

Question 66

A(n) ________ is a legal document that outlines the terms of the rental agreement.

A) lease
B) contract
C) sublet
D) application

Question 67

According to HUD, if your pretax income is $4,000, you should pay no more than ________ on rent.

A) $2,000
B) $1,200
C) $900
D) $2,500

Question 68

A ________ allows the homeowner to sell the house for less than what is owed on the mortgage but does not require the homeowner to pay the difference to the lender.

A) mortgage
B) short sale
C) loan
D) lease

Question 69

What is the process where, in the event the homeowner does not make monthly mortgage payments, the lender can take possession of the house and sell it to another buyer?

A) Leasing.
B) Mortgaging.
C) Subletting.
D) Foreclosing.

Question 70

Marty just graduated from college. She accepted a position with a firm at an annual salary of $35,000. Using HUD guidelines, what is the maximum Marty should pay for rent on a monthly basis?

A) $10,500.
B) $2,500.
C) $1,500.
D) $875.

Question 71

Elijah just graduated from college. He accepted a position with a firm at an annual salary of $45,000. Using HUD guidelines, what is the maximum Elijah should pay for rent on a monthly basis?

A) $1,125.
B) $1,200.
C) $1,250.
D) $1,300.

Question 72

A(n) ________ deposit is a fee that may be required when you sign a rental lease.

A) application
B) security
C) pet
D) All of these answer choices are correct.

Question 73

How much is an average pet deposit?

A) $100.
B) $200.
C) $300.
D) $400.

Question 74

Which of the following is a benefit of buying versus renting a house?

A) Flexible in the short term.
B) Don't need to worry about repairs.
C) Long-term stability.
D) Allows the option of moving.

Question 75

What is the maximum percentage of your monthly income that should be spent on housing expenses according to the FHA?

A) 25%.
B) 30%.
C) 31%.
D) 32%.

Question 76

The person or company that owns the property you hope to rent is referred to as the

A) landlord.
B) seller.
C) buyer.
D) manager.

Question 77

The cost for renter's insurance is typically about ________ per year.

A) $125.
B) $500.
C) $1,000.
D) $1,200.

Question 78

HUD suggests that you should spend no more than ________ of your pretax income on rent.

A) 20%
B) 30%
C) 40%
D) 50%

Question 79

Mia just graduated from college. She accepted a position with a firm earning $50 per hour. She is expected to work 1,900 hours in a year. Using HUD guidelines, what is the maximum Mia should pay for rent on a monthly basis?

A) $2,125.
B) $2,200.
C) $2,250.
D) $2,375.

Question 80

Landlords may encourage a renter to spend ________ of his or her gross monthly income on rent.

A) 20%
B) 30%
C) 40%
D) 50%