FIN 101 Ch. 5

The maximum debt-to-income ratio that is acceptable is __%

36

How is collateral used in evaluating loans? a. Collateral is using one item to pay for another item. b. Collateral is used when you apply for a credit card and the company is needing payment, so they take your home and sell it for payment. C. Collateral is used when you apply and sign for a loan, pledging some kind of property to secure the loan.

C. Collateral is used when you apply and sign for a loan, pledging some kind of property to secure the loan.

One of the 5 C's of credit is a valuable asset that can be taken to satisfy a loan obligation, which is called

Collateral

T/F: Debt-to-income ratio is calculated by total liabilities divided by net worth?

False

Which of the following statements is true? a. Credit is an arrangement to receive cash or goods or service now and pay for them later b. Credit used by a business is called consumer credit c. Credit involves paying now for future satisfaction d. Consumer credit refers to the use of credit for buying a home

a. Credit is an arrangement to receive cash or goods or service now and pay for them later

Which of the following are questions that lenders may ask to determine a potential borrower's CHARACTER? a. How long have you lived at your present address? b. How much is your salary c. What are your assets? d. What assets do you have to secure the loan? e. How long have you held your current job? f. Have you used credit before?

a. How long have you lived at your present address? e. How long have you held your current job? f. Have you used credit before?

Why are the 5 C's used? a. To help identify good customers for credit approval b. To help identify ways to reduce fees for existing customers c. To help identify customers who can be charged more

a. To help identify good customers for credit approval

Character, capacity, capital, collateral, and conditions are known as: a. the 5 C's of credit b. the conditions that are needed to work in credit management c. the C's of consumers d. The creditor's bible

a. the 5 C's of credit

When applying for a bank loan, the bank will: a. using the 5 C's when determining your creditworthiness b. will charge you a rate based upon your age c. most likely run a background check on you

a. using the 5 C's when determining your creditworthiness

Capacity is the borrower's financial _______ to meet credit obligations.

ability

When referring to credit, character means: a. the borrower's attitude toward the bank or lending firm b. the borrowers attitude toward credit obligations c. the bank's willingness to lend credit to this individual

b. the borrowers attitude toward credit obligations

What do the 5 C 's mean? a. The 5 C's are assigned different points and the consumer must have the credit score and personality to maximize creditworthiness b. The 5 C's mean you have to know 5 people who have a name starting with a C c. The 5 C's are 5 separate evaluations that a creditor will use to determine a person's creditworthiness d. The 5 C's refer to C-notes or $500

c. The 5 C's are 5 separate evaluations that a creditor will use to determine a person's creditworthiness

A borrower's assets that exceeds liabilities is called: a. collateral b. the amount of money the borrower owns c. capital

c. capital

When evaluating the 5 C's of credit, _______ is determined by a borrower's asset or net worth

capital

A bank line of credit is also known as: a. a debit card b. an open-end credit c. a cashier's check d. a revolving check credit

d. a revolving check credit

Conditions, one of the 5 c's of credit, refers to the general __________ conditions that can affect your ________ to repay a loan.

economic; ability