PFIN 7 Chapter 7 Using Consumer Loans

Which of the following statements regarding a consumer loan is true? a. A consumer loan is used to finance the purchase of very expensive items. b. A consumer loan is used chiefly to make repeated purchases of relatively low-cost goods and services. c. A consumer loan provides credit cards and checks to the consumers. d. A consumer loan results from a rather informal process and involves no negotiated contracts. e. A consumer loan provides revolving credit to the consumers.

a. A consumer loan is used to finance the purchase of very expensive items.

Parent Loans for Undergraduate Students (PLUS) loans are made to the parents or legal guardians rather than to the students. a. True b. False

a. True

A(n) _____ loan is repaid in a series of fixed, scheduled payments rather than in a lump sum. a. installment b. single-payment c. interim d. consolidated e. standard

a. installment

Which of the following statements regarding fixed-rate loans is true? a. The interest rates on fixed-rate-loans have periodic adjustment dates, at which time monthly payments are adjusted. b. Fixed-rate loans are preferable when interest rates are expected to rise. c. The cost of fixed-rate loans decreases with a decrease in the market interest rate. d. Fixed-rate loans are preferable when interest rates are expected to fall. e. The cost of fixed-rate loans increases with an increase in the market interest rate.

b. Fixed-rate loans are preferable when interest rates are expected to rise.

The most common use of consumer loans is to: a. buy furniture. b. purchase a car. c. buy a house. d. finance a vacation. e. finance college education.

b. purchase a car.