W!SE - Credit

W!SE - Credit

9th - 12th Grade

20 Qs

quiz-placeholder

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W!SE - Credit

W!SE - Credit

Assessment

Quiz

Life Skills

9th - 12th Grade

Medium

Created by

Anasia Napper

Used 166+ times

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20 questions

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1.

MULTIPLE CHOICE QUESTION

1 min • 5 pts

Which of the following is considered to be open-end credit?

A mortgage

A car loan

Department store charge cards

Installment loans

Answer explanation

Open-end credit is a revolving live of credit that is offered by banks and other lenders to consumers. There is a limit set on the line of credit and the funds, products or services are accessed using a credit or debit card, check, store charge card or cash advance. Consumers pay interest on the outstanding balance. A car loan is made for a specified amount and a specific length of time and is therefore considered closed-end credit. A mortgage loan is also considered a form of closed-end credit since the house serves as collateral for the loan which is made at a specified interest rate for a specified time period.

2.

MULTIPLE CHOICE QUESTION

1 min • 5 pts

A person has three credit cards with very large outstanding balances and is unable to make payments on any of them. Which action should the person take?

Notify a credit reporting agency in order to avoid a late fee.

File for bankruptcy in order to maintain ones current credit score.

Notify the credit card companies in order to negotiate a new payment plan.

Contact the Internal Revenue Service in order to avoid paying income tax this year.

Answer explanation

When experiencing financial difficulties, the first action to take is to notify \ncreditors, in this case the three credit card companies. Quite often the company will assist in negotiating new terms.

3.

MULTIPLE CHOICE QUESTION

1 min • 5 pts

What is meant by an uncollateralized loan?

A loan not backed by a co-signer who agrees to cover the amount of the loan.

A personal loan without assets to cover the loan amount.

A home equity loan.

A loan taken on a life insurance policy.

Answer explanation

Collateral is a tangible asset that is used to secure a loan. In the case of a mortgage, the actual house or apartment serves as the collateral for that loan. The same is true of a car loan. If the person who takes the loan, defaults on that loan, the bank or other lending agency has the right to keep the collateral. Therefore, an uncollateralized loan is one that does not have an asset to support the loan.

4.

MULTIPLE CHOICE QUESTION

1 min • 5 pts

When a person brings an item to a pawnshop to obtain cash, the transaction is considered--

a collateralized loan

a custodial payment

an unsecured loan

a sales agreement

Answer explanation

Since pawnshops make loans based on determining the value of collateral (a tangible object such as jewelry, cameras, musical instruments) they receive, the loan is considered a collateralized loan.

5.

MULTIPLE CHOICE QUESTION

1 min • 5 pts

When a person declares bankruptcy that fact will appear on the person's credit report--

for a 3 year period

for a 10 year period

until the person repays all debts owed

until the person is able to receive a new credit card

Answer explanation

Most of the adverse information on a credit report appears for 7 years. After a declared bankruptcy, the limit is 10 years.

6.

MULTIPLE CHOICE QUESTION

1 min • 5 pts

To qualify for a Federal Housing Administration (FHA) loan, a person must generally--

have at least a high school diploma.

have one-quarter of the cost of the home for a down-payment.

fulfill income guidelines.

provide two individuals to co-sign the loan.

Answer explanation

The Federal Housing Administration (FHA)

insures lenders who make mortgage loans that are riskier than regular bank loans because FHA loans are made to individuals who usually would not qualify for regular low-cost mortgages from banks (usually first-time home buyers with lower income and a weaker credit score). The objective of this federal agency is to encourage home ownership while helping to protect the lenders at the same time.

7.

MULTIPLE CHOICE QUESTION

1 min • 5 pts

Which factor would most likely lead to an increase the interest rate on a person?s credit card?

Number of purchases

Late payments

Total amount charged

Number of cash advances

Answer explanation

Before setting interest rates, credit card companies look at the individual's capacity to repay outstanding obligations. If the capacity is limited then the person is likely to make late payments.

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