Repayment Of Loans

Question 1

Financial instruments in which one party borrows money from another, such as a mortgage loan, credit card debt, or some personal line of credit.
A. Loan
B. Principal
C.long term

Answer 1

A. Loan

Question 2

This is the original amount of money that is borrowed.
A. Loan
B. Principal
C. Long term

Answer 2

B. Principal

Question 3

The amount of time due that the borrower has to repay the loan.
A. Loan
B. Principal
C. Long term

Answer 3

C. Long term

Question 4

It is the rate at which the amount of money owed increases, usually expressed in terms of an annual percentage rate (APR)
A. Loan payments
B. Interest rate
C. Long term

Answer 4

B. Interest rate

Question 5

The amount of money that must be paid every month or week in order to satisfy the terms of the loan. Based on the principal’s long term and interest rate, this can be determined from an amortization table.
A. Interest rate
B. Loan payments
C. Loan

Answer 5

B. Loan payments

Question 6

The lender may also talk on additional fees such as origination fee servicing fee or late payment.

Answer 6

True

Question 7

For larger loans they may also require collateral such as real estate or a vehicle if the borrower defaults and the loan these assets may be served to pay off the remaining debt.
True or false

Answer 7

True

Question 8

There are three tips on getting a loan.
True or false?

Answer 8

True

Question 9

For a larger loan lenders may require a certain income threshold, thereby ensuring that the borrower will have no trouble making payments. They may also require several years of stable employment especially in the case of home mortgages.
A. Income
B. Credit score
C. Debt-to - income ratio

Answer 9

A. Income

Question 10

It is a numerical representation of a person’s credit worthiness based on the history of borrowing and repayment. Miss payments and bankruptcies can cause serious damage to a person’s credit source.
A. Income
B. Credit score
C. Debt-to income ratio

Answer 10

B. Credit score

Question 11

Lenders also check the borrowers credit history to check how many active loans they have at the same time. A high level of that indicates that the borrower has difficulty paying their debts.
A. Income
B. Credit score
C. Debt to income ratio

Answer 11

C. Debt to income ratio

Question 12

-It means paying back the amount i can from the lender.
-usually done by monthly payments over the stipulated period of your loan.
- includes paying back the principal amount (the original sum of money borrowed) and the interest change on it.
A. Loan payments
B. Loan repayment
C. Loan

Answer 12

B. Loan repayment

Question 13

There are two methods of loan repayment. True or false?

Answer 13

True

Question 14

-It is the most prevalent and popular method of repaying debt.
-you are required to pay on a particular date of the month to you the tenure of your loan.
A. Equated monthly installments
B. Bullet Payment option

Answer 14

A. Equated monthly installments

Question 15

-You just need to pay the amount of interest every month and the principal components need to be paid
after the end of the tenure of your loan in one go.
A. Equated monthly installments
B. Bullet Payment option

Answer 15

B. Bullet Payment option

Question 16

There are two types of loans .
True or false?

Answer 16

True

Question 17

-you have to provide an asset as a security for the loan to a lender. In case, if you are not able to pay the loan, then the lender can take possession of your asset and can recover the loan.
Examples: loans, gold loans, loans against property
A. Unsecured loans
B. Secured loans

Answer 17

B. Secured loans

Question 18

-there is no requirement for collateral or security. The lender can give you the loan based on your past credit history, credit score, etc.
-the rate of interest is higher than secured loans.
Example: personal loans, education loans, etc.
A. Secured loans
B. Unsecured loans

Answer 18

B. Unsecured loans

Question 19

Amount that you borrowed from banks and financial institutions and promised to return in fixed terms.
A. Loan
B.Secured loans
C. Unsecured loans

Answer 19

A. Loan

Question 20

It is very important for maintaining a good credit score credibility as a borrower.
A. Loan
B. Timely payment

Answer 20

B. Timely payment

Question 21

What does APR stand for in loan repayment?
a) Annual Payment Rate
b) Annual Principal Return
c) Annual Percentage Rate
d) Amortization Payment Ratio

Answer 21

Answer: c) Annual Percentage Rate

Question 22

Which factor does NOT typically affect the monthly repayment amount for an amortizing loan? a) Loan principal
b) Loan term
c) Borrower’s credit score
d) Loan origination fee

Answer 22

Answer: d) Loan origination fee

Question 23

Grace period in loan repayment refers to:
a) The time before the loan application is processed
b) A period during which no interest is charged on the loan
c) The time after the loan repayment is complete
d) The time to review loan terms after approval

Answer 23

Answer: b) A period during which no interest is charged on the loan

Question 24

What is the primary difference between principal and interest payments in loan repayment?
a) Principal is the original amount borrowed, while interest is the cost of borrowing.
b) Principal is the interest charged on the loan, while interest is the amount borrowed.
c) Principal is the total repayment amount, while interest is the additional fee.
d) Principal and interest are the same in loan repayment.

Answer 24

Answer: a) Principal is the original amount borrowed, while interest is the cost of borrowing.

Question 25

How does loan refinancing differ from loan consolidation? a) Refinancing merges multiple loans into one, while consolidation adjusts interest rates. b) Consolidation adjusts loan terms, while refinancing combines multiple loans. c) Refinancing replaces an existing loan with a new one, while consolidation combines multiple loans into a single one. d) Both terms refer to the same process.

Answer 25

Answer: c) Refinancing replaces an existing loan with a new one, while consolidation combines multiple loans into a single one.

Question 26

Negative amortization occurs when: a) The loan term is extended beyond the agreed period. b) The borrower fails to repay the interest on time. c) Monthly payments are insufficient to cover the interest, leading to an increase in the loan balance. d) The loan is repaid before the due date.

Answer 26

Answer: c) Monthly payments are insufficient to cover the interest, leading to an increase in the loan balance.

Question 27

What is the significance of the debt-to-income ratio in loan repayment? a) It measures the borrower's ability to repay the loan based on income. b) It determines the loan amount to be repaid . c) It measures the lender's risk in giving a loan. d) All of the above

Answer 27

Answer: a) It measures the borrower's ability to repay the loan based on income.

Question 28

Balloon payments in loans: a) Involve making large payments at the beginning of the loan term. b) Require smaller periodic payments throughout the loan term. c) Require a larger final payment at the end of the loan term. d) Involve paying off the loan in equal installments.

Answer 28

Answer: c) Require a larger final payment at the end of the loan term.

Question 29

Loan forgiveness programs are designed to: a) Erase a borrower's entire loan balance. b) Reduce the interest rate on the loan. c) Extend the loan repayment period. d) None of the above.

Answer 29

Answer: a) Erase a borrower's entire loan balance.

Question 30

What happens when a borrower defaults on a loan? a) The loan interest rate decreases. b) The loan term extends automatically. c) The lender takes legal action due to non-payment. d) The borrower receives a grace period extension.

Answer 30

Answer: c) The lender takes legal action due to non-payment.

Question 31

Which loan repayment method allows for a line of credit that can be borrowed against and repaid repeatedly? a) Balloon payment b) Installment loan c) Revolving credit d) Fixed-rate loan

Answer 31

Answer: c) Revolving credit

Question 32

The Annual Percentage Rate (APR) includes: a) Only the interest rate. b) Interest rate and any additional fees or charges. c) Principal amount. d) Loan origination fee.

Answer 32

Answer: b) Interest rate and any additional fees or charges.

Question 33

How does early repayment or prepayment affect the total cost of a loan? a) Increases the total cost of the loan. b) Decreases the total cost of the loan. c) Has no effect on the total cost of the loan. d) Increases the interest rate.

Answer 33

Answer: b) Decreases the total cost of the loan.

Question 34

What does the term "amortization" refer to in loan repayment? a) Process of paying off loan interest only b) Process of spreading out loan payments over time c) Process of repaying the loan's principal amount d) Process of delaying loan repayment

Answer 34

Answer: c) Process of repaying the loan's principal amount

Question 35

The loan term refers to: a) The time period within which a borrower can apply for a loan. b) The length of time for which the loan agreement is valid. c) The period during which interest accrues on the loan. d) The length of time to repay the loan in full

Answer 35

Answer: d) The length of time to repay the loan in full.

Question 36

Collateral in loan agreements refers to: a) The borrower's credit history. b) Additional charges added to the loan amount. c) Assets pledged to secure the loan. d) The borrower's income

Answer 36

Answer: c) Assets pledged to secure the loan.

Question 37

What is the purpose of a loan repayment schedule for borrowers? a) To track the lender's profit from the loan. b) To plan and manage payments over the loan term. c) To set the interest rate for the loan. d) To determine the loan forgiveness eligibility

Answer 37

Answer: b) To plan and manage payments over the loan term.

Question 38

Loan default occurs when: a) The borrower fails to make scheduled payments as per the loan agreement. b) The lender refuses to provide a loan extension. c) The borrower pays off the loan before the due date. d) The loan interest rate decreases

Answer 38

Answer: a) The borrower fails to make scheduled payments as per the loan agreement.

Question 39

What role does the credit score play in loan repayment terms? a) It influences the loan amount but not the interest rate. b) It affects the interest rate but not the loan amount. c) It has no impact on loan repayment terms. d) It determines the loan origination fee.

Answer 39

Answer: b) It affects the interest rate but not the loan amount.

Question 40

Which situation best describes loan consolidation? a) Combining multiple loans into a single new loan with a lower interest rate. b) Taking out a new loan to pay off the existing loan. c) Reducing the monthly payment by extending the loan term. d) Negotiating a reduced interest rate with the lender.

Answer 40

Answer: a) Combining multiple loans into a single new loan with a lower interest rate.