Chapter 07 Quiz

Which federal law (passed in 1969) requires creditors to state the cost of borrowing as a dollar amount so that consumers would know exactly what the credit charges were and thus could compare credit costs and shop for credit?

Truth in Lending Act

A person filing for relief under the bankruptcy code is called:

a debtor.

In a Chapter 7 bankruptcy, a debtor:

all of the answers are correct. [must provide a list of all creditors and the amount and nature of their claims. must provide a list of all the debtor's property. must provide a detailed list of the debtor's monthly expenses. must provide the source, amount, and frequency of the debtor's income.]

Excessive indebtedness can result in:

all of the choices are possible results. [heavy drinking. a neglect of children. marital difficulties. drug abuse.]

One of the disadvantages of borrowing on financial assets (collateral) is that:

the assets are tied up until you have repaid the loan.

Spike goes to a payday loan company to borrow $100. He gives them a check for $115. 14 days later he returns & redeems the check for $115 cash. What APR is he paying?

391%

By evaluating your credit options, you can:

All of these choices are correct. [reduce your finance charges. reconsider your decision to borrow money. discover a less expensive type of loan. find a lender that charges a lower rate.]

Financial and other institutions, the sources of credit:

All of these choices are correct.[come in all shapes and sizes. play an important role in our economy. offer a broad range of financial services.]

Which bankruptcy allows a debtor with a regular income to extinguish his or her debts from future earnings or other property over a period of time?

Chapter 13

Which of the following is correct about the "Rule of 78s?

It favors lenders and dictates that you pay more interest at the beginning of a loan.

What is (are) the danger signal(s) of potential debt problems?

all of the choices are the danger signals of potential debt problems [paying only the minimum balance on credit cards each month. missing payments or paying late. using savings to pay routine bills. depending on overtime or bonuses to meet normal expenses.]

Most people who are in debt over their heads are:

basically honest people who want to clear up their indebtedness.

If you cannot pay your bills on time (due to a sudden illness or loss of your job), you should:

contact your creditors at once and try to work out a modified payment plan with them.

Which type of credit insurance repays your loan in the event of a loss of income due to illness or injury?

credit accident and health insurance

Which of the following financing methods provides a float period?

credit card

The most commonly purchased type of credit insurance is:

credit life insurance.

According to the Consumer Credit Counseling Service, the most common reason that consumers don't pay their bills on time is:

excessive use of credit

Of the following, which is generally the most expensive lender?

finance companies.

If you default on your automobile loan:

no advance notice is required before repossession.

Which is often the source of the least expensive loan?

parents or family members