Exam 7: Using Consumer Loans

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -You are borrowing $5,000 at 9%.You may choose a 24 or 36 month repayment plan.Monthly payments will be higher with the [24 | 36] month plan.

Credit unions lend money to qualified people who are

Besides the finance charge,you should also consider ____ when you shop for a consumer loan.

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

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.

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

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

If the add-on method is used to calculate a finance charge of $150.80 on a $2,200 loan,the amount to be repaid is $2,200.

Calculate the average percentage rate (APR)for an add-on loan with 36 monthly installments.The principal is $4,000; the stated interest rate is 6%.

Sales finance companies commonly purchase the retail installment contracts of businesses that sell big-ticket items such as automobiles,furniture,and appliances.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -To get a government-backed student loan,one should contact his [bank | university].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -The majority of consumer loans are made with [fixed | variable] interest rates.

When the simple interest method is used to determine finance charges,the interest is calculated based on the

To qualify for a Perkins loan,you must

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -If the proceeds from the sale of your repossessed collateral are insufficient to pay the balance due on your loan,the lender usually [can | cannot] collect the deficiency from you.

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

Sometimes it may be better to use savings rather than borrow to make a purchase.This would be recommended when

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

A ____ is often a source of low-rate automobile financing on specific models of vehicles.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Borrowers are more likely to ask for a(n)[single payment | installment payment] consumer loan.