Finance Test #3

___ are the credit cards issued in conjunction with a sponsoring group - most commonly some type of charitable, political, or professional organization

Affinity cards

Which of the following will lead to a poor credit rating?

Applying for a long-term loan and occasionally being late with a payment

Which of the following statements about the cash advances that the holder of a bank credit card can obtain from participating banks is true?

Cash advances obtained from the teller window at a bank are limited by the unused credit in the borrower's account

Which of the following statements regarding loan collateral is true?

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

Borrowing from ___ is not advisable

relatives

If the information in an individual borrower's credit report contains an error, he or she is entitled to:

request a correction

Credit offered in the form of ___ is most common in department and clothing stores and other high-volume outlets, where customers are likely to make several purchases each month

retail charge cards

Janey makes frequent small purchases and pays off the total outstanding balance on her credit card every month. Which of the following features is most attractive to her when searching for a credit card provider?

No annual fee

Williams uses his bank credit card frequently; however, he always pays off the total outstanding balance on the card each month. What should William look for in a credit card given the way he uses one?

No annual fee and a grace period

___ loans do not have to be repaid until after you graduate from college

Only Perkins

Which of the following modes of identity theft involves thieves obtaining your personal information from financial institutions and other sources under false pretenses?

Pretexting

___ involves some type of debt restructuring by establishing a debt repayment schedule

The wage earner plan

Which of the following statements regarding credit unions is true?

They provide installment loans to their members

Most of your debts would be totally discharged under chapter _____ of the federal bankruptcy law.

7

Which of the following is an improper use of credit?

Buying a short-lived good

Which of the following statements regarding loan maturity is true?

the longer the loan maturity, the higher the amount of interest paid

Retail charge cards are advantageous to merchants because:

they help build consumer loyalty

If Liza's debt safety ratio is 15% and her monthly take-home pay is $4,500, which of the following equals her total monthly payments?

$1,200

Russ and Lois have a home valued at $96,000 with an outstanding mortgage of $60,000. If their lender is willing to provide a home equity loan of up to 75% of the market value of the home, how much can they borrow using a home equity loan?

$12,000

The FICO credit scoring system assigns points according to:

amounts owed

Jenny's monthly take-home pay is $5,000 and her total monthly payments are $1,000. Which of the following is Jenny's debt safety ratio?

20%

Lenders' guidelines say that you are likely to have financial difficulties if your personal credit obligations exceed ___ of your take-home pay

20%

Loan repayment under the Parent Loans for Undergraduate Students (PLUS) program normally begins within ___ of loan disbursement

60 days

Which of the following statements regarding a consumer loan is true?

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

James finds it difficult to manage credit but wants the convenience of using a credit card. He wants to get a car that will provide direct access to his checking account. James should get a:

Debit card

Which of the following statements regarding fixed-rate loans is true?

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

Which of the following is the correct formula for calculating the debt safety ratio?

Total Monthly Consumer Credit Payments / Monthly Take-Home Pay

An improper used of extended credit is buying:

an expensive dinner

A straight bankruptcy

allows a debtor to retain some other personal assets as per federal regulations

The most expensive method for determining finance charges on revolving credit would be the:

average daily balance (ADB) method including new purchases

Which of the following cards provides direct access to you checking account?

bank debit cards

Sales finance companies

buy installment loans from retailers

It is good to use credit for:

buying a car

A(n) ___ is a type of reporting agency that collects and sells credit information about individual borrowers.

credit bureau

Which of the following sources of consumer loans often has the most favorable terms for borrowers?

credit unions

A payment made using a(n) ___ is equivalent to paying by cash

debit card

Chapter 7 of the bankruptcy code:

eliminates most of the financial obligation by the borrower

The decision about whether or not to grant you credit will be made by:

individual creditors

When canceling a credit card, you should cut up the card and ____ that you are canceling your account.

inform the credit bureau in writing

A(n) __ loan is repaid in a series of fixed, scheduled payments rather than in a lump sum

installment

A single-payment loan used to finance a purchase when the cash to be used for repayment is known to be forthcoming in the near future is a form of:

interim financing

A legal claim that allows creditors to liquidate loan collateral is a:

lien

A legal claim that allows lenders to liquidate loan collateral, in case the borrower defaults, is called a:

lien

A person who pays off his credit card balance every month should look for a credit card with a:

long grace period

Credit unions lend money to qualified people who are their:

members

To establish credit, you should first:

open savings and checking accounts

Any credit card purchase will effectively be an interest-free loan if you have zero balance when the grace period begins and you:

pay off the entire balance on or before the due date

Which of the following is not requested in a typical credit card application?

political affliations

Which of the following is an example of phishing?

pretending to be an employee of a financial institution

A frequent flyer card can be aptly classified as a(n):

reward card

If you are expecting difficulties in making your payments, it is recommended that you:

talk to the creditors

With a bank credit card, one can often avoid interest charges if:

the account balance is paid in full every month

A loan rollover means that:

the loan is paid off by taking out another loan.

Commercial banks are able to charge lower interest rates than other lending institutions because:

they usually take only the best credit risks

The rate of interest charged on __ loans changes periodically in keeping with prevailing market conditions

variable-rate