Exam 7: Using Consumer Loans

A personal,unsecured consumer loan is most frequently 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.

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. -To get a government-backed student loan,one should contact his [bank | university].

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. -The interest paid on a student loan [is sometimes | is not] tax deductible.

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. -It is [legal | illegal] for a lender to charge a pre-payment penalty.

If the discount method is used to calculate a finance charge of $250.60 on a $2,400 loan,the amount to be disbursed to the borrower is $2,400.

GMAC is an example of a captive sales finance company.

Which of the following loan sources is the most expensive?

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

To qualify for a Perkins loan,you must

Downward Motors has offered Vicki either a $2,500 rebate or a 2%,4-year loan on the new SUV she is purchasing for $33,000 with a $3,000 down payment.Vicki has done her homework and knows that she can get a 6%,4-year loan at his credit union.Should Vicki take the rebate or the 2% loan from the dealer? (Show your key strokes.)

Calculate the finance charge and the monthly payment on a $20,000 add-on installment loan with an interest rate of 9% and a term of 5 years.(Show all work.)

Consumer finance companies usually charge lower rates of interest than commercial banks.

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. -Consolidation loans are generally [inexpensive | expensive].

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 [sales finance company | captive finance company] purchases notes drawn up by sellers of typically big-ticket items.

If a loan has a prepayment penalty,there will be an additional cost to repay the loan early.

A personal consumer loan could be used to

Savings and loan associations are allowed to make loans for things like cars,boats,and motorcycles.

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 $1,000,APR is 10%,and the loan maturity is one year.Total interest charges will be higher if [you pay off the loan in 12 monthly installments | you make one payment in full at the end of the year].

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. -Loans to relatives and friends should be [verbal | written] agreements.