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Exam 7: Using Consumer Loans

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Question 61

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Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -You are borrowing $5,000 at 9%.You may choose a 24 or 36 month repayment plan.The total finance cost will be higher with the [24 | 36] month plan.

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Question 62

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When comparing two installment loans with the same principal and APR,the loan with the longer maturity will have the lower monthly payment and the higher total costs.

A) True
B) False

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Question 63

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Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -Loan repayment of a [Perkins | PLUS] loan would not begin until a student is out of school.

Both single-payment and installment loans can have variable interest rates.

Commercial banks are generally more selective in granting loans than finance companies.

Home equity loans are similar to other installment loans except

Commercial banks generally charge lower interest rates than other lending institutions because

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -An [add-on | acceleration] clause allows the lender to demand repayment of the entire debt if the borrower defaults on his payments.

Jamil is purchasing a new truck for $30,000.Jamil is making a $2,000 down payment,and he will make 60 monthly payments of $541 each.What are the total finance costs on this loan?

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -A finance company uses the discount method of calculating interest.The loan principal is $5,000,the interest rate is 10%,and repayment is expected in two years.You will receive [$5,000 | $4,000] from the lender.

Installment loans are typically repaid in one payment.

Variable rate loans are desirable if interest rates are expected to fall in the future.

The add-on method is less expensive than the simple interest method when stated rates of interest are identical.

If a 12-month installment loan is prepaid at the end of 6 months,less than one half of the interest would be saved.

Consumer loans are most commonly used to obtain durable goods.

About one in four student loans are past due.

Consumers whose debt burden has become very heavy might apply for a(n)

Generally speaking,variable rate loans are desirable if interest rates are expected to increase over the course of the loan.

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

A loan from the cash value of your life insurance policy would be characterized by