PFIN Exam 2 Ch 7

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%

A single-payment loan:

usually matures in one year or less

The monthly payment on an 8%, 36 month, add-on lean for $10,000 would be

$344

Which of the following is a feature of a home equity loan?

The interest paid on a home equity loan is tax deductible

Consumers whose debt burden has become very heavy might apply for a

Consolidation loan

The highest interest rate installment loans are usually made by:

Consumer finance companies

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

Actual balance of the loan

Which of the following sources of consumer loan often has the most favorable terms?

Credit Unions

Which of the following is true of fixed-rate loans:

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

Which of the following is true of installment loans?

Installment loans offer the benefit of tax deductibility of the interest paid on them

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

Lien

Credit unions lend money to qualified people who are

Members

The most popular use of consumer loans is to:

Purchase a car

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

Stafford and Perkins

Sometimes it may be better to use one's savings rather than borrowing to make a purchase. This would be recommended when:

The cost of borrowing is greater than the interest earned on the savings