final 6 Flashcards
(30 cards)
Which of the following is one of the “Five C’s of Credit”?
A. Convenience
B. Character
C. Consistency
D. Calculation
B. Characte
What is the term for the financial ability to repay a loan with present income?
A. Character
B. Collateral
C. Capital
D. Capacity
Capacity
Which of these statements best explains why it’s often a good idea to pay more than the
monthly amount due on an amortized loan?
A. Every time you pay extra, the lender will reduce the interest rate they’re
charging by a small amount.
B. The extra payment will be applied to the principal amount you owe, which will
pay down your debt more quickly.
C. The extra payment will be applied to the interest you owe, which will reduce
the overall cost of your loan.
D. Amortized loans typically have a much higher i
B. The extra payment will be applied to the principal amount you owe, which will
pay down your debt more quickly.
If you are having trouble making your auto loan payments, and are really following a
tight budget, which recommendation below represents the WORST advice?
A. Find an extra source of income by taking a second job, working longer hours,
asking for a raise, etc.
B. Stop making payments on some of your other debts so you can focus on getting
the most expensive or largest debts under control.
C. Continue making all payments and call your lenders to see if you can negotiate
lower monthly payments, lower interest rates, or longer terms.
D. Reduce spending in some other area of your budget so you can direct more
funds toward debt payments.
B. Stop making payments on some of your other debts so you can focus on getting
the most expensive or largest debts under control.
Select the statement below that accurately describes a characteristic of a credit card.
A. You owe the same payment every month.
B. You must have money deposited into a checking account to use the credit card
for purchases.
C. Making full payments on time every month is the only way to avoid interest
charges.
D. They do not charge interest.
C. Making full payments on time every month is the only way to avoid intere
What is credit?
A. The option to purchase things now and pay for them later, usually with
interest
B. The interest paid on an item bought with a credit card
C. The cost of interest and fees over the life of a loan
D. The report used to decide whether or not to extend a loan to a borrower
A. The option to purchase things now and pay for them later, usually with
Which of the following would have the highest interest rate?
A. A personal loan
B. A credit card
C. A student loan
D. A payday loan
D. A payday loan
A loan that is backed by something of value pledged to ensure payment is called a
__________.
A. Non-secured loan
B. Secured loan
C. Signature loan
D. None of the above
B. Secured loan
Which statement best describes why payday loans are sometimes referred to as
“predatory lending”?
A. Competition to qualify for these loans is fierce, like a competitor.
B. The sales people who work at these locations are often mean and unfriendly.
C. Lenders “prey” on low-income borrowers who have little to no other options for
obtaining a loan.
D. “Predatory lending” is an offical category the government uses to describe
these particular types of loans, based on the fine print in the agreements
Lenders “prey” on low-income borrowers who have little to no other options for
obtaining a loan.
You see on a commercial that OrangeCo is offering a credit card with a 5% cashback
program for all cardholders. What is ONE question you might ask to evaluate how
good this offer is?
A. Can I choose the picture that is on the front of my credit card?
B. Can I get a debit card along with a new credit card?
C. Who does OrangeCo use as their spokesperson in the commercial?
D. Is there an annual fee on this credit card and if so, how much is it?
D. Is there an annual fee on this credit card and if so, how much is it?
All of the following could show up on your credit report EXCEPT….
A. Salary of your current job
B. Payment history of your car loan
C. Credit card payment history
D. Student loan activity
A. Salary of your current job
How can your credit score impact your financial situation?
A. Consumers with high scores can borrow and those with low scores cannot.
B. Consumers with low scores get lower interest rates on loans than those with
high scores.
C. Your credit score can determine whether you are approved for a loan and
what the interest rate on that loan will be.
D. It generally has no impact on your financial situation.
C. Your credit score can determine whether you are approved for a loan and
What are the two most important factors in calculating your credit score?
A. Payment history and types of accounts
B. Amounts owed and length of credit history
C. Payment history and amounts owed
D. Length of credit history and new credit inquiries
C. Payment history and amounts owed
I forgot to pay my credit card bill one month. For how long will that payment
information show up on my credit report?
A. Once I make the payment, it will disappear.
B. One year
C. Seven years
D. Ten years
C. Seven year
Which of these represents a potential consequence of neglecting to pay your credit
card or loan debts?
A. Wages or tax refunds can be garnished.
B. Lender can file bankruptcy on your behalf.
C. Collection agencies begin visiting your friends and family to collect your debt.
D. You lose your job.
A. Wages or tax refunds can be garnished
When a person declares bankruptcy, that fact will appear on the person’s credit report
for how long?
A. Up to 3 years
B. Up to 10 years
C. Until the person repays all the debts they owe
D. Until the person receives a new credit card
B. Up to 10 years
Your friend confides in you that he has a low credit score. What is the single best way
for him to improve his credit score?
A. Cancel his credit cards
B. Make on-time payments
C. Get a car loan
D. Check his credit score daily
B. Make on-time payments
Which best describes the Debt Snowball method for paying off debt?
A. Only make payments on your smallest debt first, then move on to your second
smallest debt, and so on…
B. Once your debt “snowballs” out of control, hire a certified credit counselor to
help get your finances back on track.
C. Make the monthly minimum payments on all your debts and put any extra
cash toward the debt with the highest balance.
D. Make the monthly minimum payments on all your debts and put any extra
cash toward the debt with the lowest balance.
D. Make the monthly minimum payments on all your debts and put any extra
cash toward the debt with the lowest balance.
The information that a lender must disclose to consumers applying for a cash loan
is….
A. The formula for compound interest
B. The annual percentage rate (APR) and/or the finance charge
C. The average interest rate of competitor banks
D. The tax obligations
B. The annual percentage rate (APR) and/or the finance charge
Which of the following individuals or groups would be the LEAST likely to look at your
credit score?
A. Employers
B. Credit card companies
C. Auto insurers
D. A bank representative who is helping you open a savings account
D. A bank representative who is helping you open a savings account
Individuals can verify the accuracy of their credit histories by reviewing a __________
that is obtained from a __________.
A. Credit certificate; credit union
B. Bank statement; financial institution
C. Lending statement; tax agency
D. Credit report; credit bureau
D. Credit report; credit bureau
Which of the following is most likely to represent a fixed rate, secured debt?
A. A student loan
B. A credit card
C. A loan from a friend
D. A dealer-financed auto loan
D. A dealer-financed auto loan
What is one benefit of selecting an income-based repayment plan for your student
loans?
A. If you take a job that pays a low income, you will never have to pay back any
of your student loans.
B. Your student loan interest rate will fluctuate based on how much you’ve
earned in the previous year.
C. Your monthly loan payment will be set based on your income, so that you’re
not paying more than 20% of your income toward your loans.
D. The total loan amount will be decreased to meet your starting salary at your
first post-college job.
C. Your monthly loan payment will be set based on your income, so that you’re
not paying more than 20% of your income toward your loans.
Which of the following factors could affect the interest rate charged on your loan?
A. The item you are financing (i.e., house vs. car)
B. Your credit score/history
C. The lender you choose
D. All of the above
D. All of the above
