Question 1

The most common use of consumer loans are to purchase automobiles.

Accepted Answer

Consumer loans are frequently used to purchase automobiles, making it the most prevalent use of such loans.

Question 2

Consumer loans are most commonly used to obtain durable goods.

Accepted Answer

Consumer loans are commonly used to finance durable goods such as cars, appliances, and furniture.

Question 3

A personal,unsecured consumer loan is most frequently used to help borrowers straighten out a critical financial situation.

Accepted Answer

False

Question 4

Consolidation loans are used to purchase new furniture and appliances when many items are needed at the same time.

Accepted Answer

Consolidation loans are actually used to combine multiple debts into one, making it easier to manage and often with a lower interest rate. They typically do not specifically cater to purchasing new furniture and appliances.

Question 5

Consumer loans,like open account credit,result from a rather informal process.

Accepted Answer

The answer of Consumer loans,like open account credit,result from a...

Question 6

The student loans with the best loan terms are the Stafford and the Perkins loans.

Accepted Answer

The Stafford and Perkins loans typically offer lower interest rates and more flexible repayment options compared to other types of student loans. They also do not require a credit check or a co-signer in most cases.

Question 7

In order to receive student loans,the student must be making satisfactory progress in his academic program.

Accepted Answer

The answer of In order to receive student loans,the student...

Question 8

Consolidation loans are often used to help borrowers straighten out a critical financial situation.

Accepted Answer

Consolidation loans can be a helpful tool for borrowers struggling with high interest rates and multiple debts. By combining all of their debts into one loan with a lower interest rate, borrowers can simplify their repayment process and potentially save money in the long run.

Question 9

Student loans are made by banks and other financial institutions,but students apply for these loans through their universities.

Accepted Answer

The answer of Student loans are made by banks and...

Question 10

From a financial planning perspective,you should ask yourself how low of a payment you can get when considering using consumer loans.

Accepted Answer

From a financial planning perspective, it's important to consider the overall cost of borrowing, including interest rates and fees, rather than solely focusing on the lowest monthly payment.

Question 11

Consumer loans are often used by individuals today to purchase nondurable items.

Accepted Answer

The answer of Consumer loans are often used by individuals...

Question 12

College costs have been escalating,but not as rapidly as the overall rate of inflation.

Accepted Answer

The answer of College costs have been escalating,but not as...

Question 13

The student loans with the lowest rates of interest and the best loan terms are the PLUS loans.

Accepted Answer

PLUS loans usually have higher interest rates compared to other federal student loans, such as Direct Subsidized and Unsubsidized loans. Additionally, PLUS loans require a credit check and do not have the same borrower protections and repayment options as other federal student loans.

Question 14

The cash value of a whole life insurance policy can be used as a source of loan collateral.

Accepted Answer

The cash value of a whole life insurance policy can be borrowed against and used as collateral for a loan. However, it is important to note that borrowing against the cash value will decrease the death benefit of the policy and may have tax implications.

Question 15

Collateral is an item of value used to secure the principal portion of a loan.

Accepted Answer

This statement is true. Collateral is often required by lenders as a form of security in case the borrower is unable to repay the loan. The collateral serves as a guarantee for the lender that they will be able to recoup some or all of their losses in case of default. Common forms of collateral include real estate, vehicles, and inventory.

Question 16

PLUS loans are made to parents or legal guardians rather than to the student.

Accepted Answer

PLUS loans are federal loans made to parents or legal guardians of dependent undergraduate students to help pay for education expenses not covered by other financial aid.

Question 17

College costs have been escalating faster than the overall rate of inflation.

Accepted Answer

According to data from the College Board, the average cost of tuition and fees at four-year public universities has risen by 212% over the past 30 years, outpacing the overall rate of inflation.

Question 18

The student loans with the lowest rates of interest and the best loan terms are the PLUS loans.

Accepted Answer

PLUS loans actually have higher interest rates than many other types of student loans. Additionally, they are only available to graduate and professional students, as well as parents of dependent undergraduate students. Other types of loans, such as subsidized and unsubsidized federal loans, may have lower interest rates and more flexible repayment options.

Question 19

Borrowing to pay for a college education is a legitimate use of credit.

Accepted Answer

Borrowing to pay for a college education can be considered an investment in one's future earning potential and is therefore a legitimate reason to take out a loan. However, it is important to carefully consider the terms of the loan and to ensure that repayment will be manageable after graduation.

Question 20

Earnings on 529 college savings plans can be tax free when used for qualifying college education expenses.

Accepted Answer

Earnings on 529 college savings plans can be withdrawn tax-free when used for qualified education expenses such as tuition, fees, books, and room and board.

Quiz 7: Using Consumer Loans

The most common use of consumer loans are to purchase automobiles.

Consumer loans are most commonly used to obtain durable goods.

A personal,unsecured consumer loan is most frequently used to help borrowers straighten out a critical financial situation.

Consolidation loans are used to purchase new furniture and appliances when many items are needed at the same time.

Consumer loans,like open account credit,result from a rather informal process.

The student loans with the best loan terms are the Stafford and the Perkins loans.

In order to receive student loans,the student must be making satisfactory progress in his academic program.

Consolidation loans are often used to help borrowers straighten out a critical financial situation.

Student loans are made by banks and other financial institutions,but students apply for these loans through their universities.

From a financial planning perspective,you should ask yourself how low of a payment you can get when considering using consumer loans.

Consumer loans are often used by individuals today to purchase nondurable items.

College costs have been escalating,but not as rapidly as the overall rate of inflation.

The student loans with the lowest rates of interest and the best loan terms are the PLUS loans.

The cash value of a whole life insurance policy can be used as a source of loan collateral.

Collateral is an item of value used to secure the principal portion of a loan.

PLUS loans are made to parents or legal guardians rather than to the student.

College costs have been escalating faster than the overall rate of inflation.

The student loans with the lowest rates of interest and the best loan terms are the PLUS loans.

Borrowing to pay for a college education is a legitimate use of credit.

Earnings on 529 college savings plans can be tax free when used for qualifying college education expenses.