Question 1

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

Accepted Answer

False

Question 2

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

Accepted Answer

False

Question 3

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

Accepted Answer

According to various reports and data, the most common use of consumer loans is to finance the purchase of automobiles. Other common uses include credit card debt consolidation, home improvements, and personal expenses.

Question 4

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

Accepted Answer

The answer of A personal,unsecured consumer loan is most frequently...

Question 5

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 6

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

Accepted Answer

PLUS loans generally have higher interest rates compared to other federal student loans and require a credit check. The loans with the lowest rates and best loan terms are typically subsidized and unsubsidized federal loans.

Question 7

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 as collateral for a loan. This is because the policy has a cash value component that accumulates over time and can be used for various purposes, including taking out a loan. However, it is important to note that borrowing against the cash value of the policy can reduce the death benefit and may also result in additional fees or interest charges.

Question 8

Consumer loans are most commonly used to obtain durable goods.

Accepted Answer

Consumer loans are often used for purchasing durable goods such as cars, appliances, and furniture.

Question 9

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

Accepted Answer

Consumer loans are often used by individuals today to purchase durable items, such as cars, appliances, and furniture.

Question 10

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

Accepted Answer

PLUS loans are federal loans that are made to parents or legal guardians of dependent undergraduate students to help pay for their education expenses.

Question 11

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

Accepted Answer

Both the Stafford and Perkins loans offer low fixed interest rates and flexible repayment options, making them good options for students seeking loans with favorable terms.

Question 12

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, the focus should not be on getting the lowest payment possible when considering using consumer loans. Rather, it is important to consider the interest rate, loan term, and overall cost of the loan in order to make an informed decision that aligns with your financial goals and budget. Opting for a lower payment may ultimately result in paying more in interest over time.

Question 13

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

Accepted Answer

According to data from the College Board, the average tuition and fees at four-year public colleges have increased by 2.4% per year above inflation over the past decade. Private nonprofit four-year colleges have increased by 1.8% per year above inflation. This means that college costs have been increasing at a faster rate than the overall rate of inflation.

Question 14

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

Accepted Answer

Consolidation loans are not typically used to purchase new furniture and appliances. They are loans that combine multiple debts into one payment, often with a lower interest rate, to make it easier for the borrower to manage and pay off their debt.

Question 15

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

Accepted Answer

The PLUS loans have higher interest rates and less favorable loan terms compared to some other types of student loans, such as subsidized and unsubsidized Stafford loans.

Question 16

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 17

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 tax free when used for qualifying college education expenses.

Question 18

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 a legitimate use of credit because it is an investment in one's future earning potential. However, it is important to borrow responsibly and make sure that the cost of the education is reasonable compared to the expected salary after graduation.

Question 19

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

Accepted Answer

Consolidation loans are designed to combine multiple debts into a single loan with a lower interest rate and monthly payment. This can help borrowers manage their debts more effectively and potentially save money in the long run. It is often used by people who are struggling with multiple debts and seeking a way to get out of a critical financial situation.

Question 20

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

Accepted Answer

Collateral is used as a guarantee for repayment of a loan, and if the borrower defaults on the loan, the lender has the right to seize and sell the collateral to recover the outstanding balance. This can be any asset of value, such as a home, car, or jewelry.

Quiz 7: Using Consumer Loans

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

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

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

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

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

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.

Consumer loans are most commonly used to obtain durable goods.

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

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

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

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

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

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

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

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

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

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

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

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