Personal Loans Test

What is the primary factor traditional loan products rely on when deciding whether to approve a loan?

• The borrower's employment history

• The borrower's income level

• The value of the borrower's collateral

• The borrower's credit report and credit score

What is the design purpose of payday loans?

• To be repaid within a few weeks when the borrower receives a paycheck

• To consolidate other debts into one loan

• To be repaid over several years

• To finance large purchases, like a home or car

How is the APR of an alternative loan like a payday loan typically calculated?

• By multiplying the short-term rate over the course of a year

• Based on a fixed annual interest rate

• Using the borrower's credit score

• Based on the loan amount and collateral value

What do pawn shops and title loan companies base their loan amounts on?

• The borrower's monthly income

• The borrower's credit report

• The value of collateral

• The borrower's employment status

Which of the following is NOT listed as a way to avoid expensive loans?

• Having an emergency fund

• Borrowing money from family or friends

• Selling something of value

• Using payday lenders and pawn shops

What advice might you give to someone like Justin who needs a small amount of money to cover bills for the month?

• Invest in the stock market to make quick money

• Ask a friend or family member for a loan

• Take out a payday loan immediately

• Purchase lottery tickets in hopes of winning the needed funds

What distinguishes a secured loan from an unsecured loan?

• Unsecured loans can be taken out for larger amounts than secured loans

• Unsecured loans are only available to borrowers with high credit scores

• Secured loans are backed by collateral

• Secured loans have lower interest rates because they are less risky

What is a characteristic of an installment loan?

• The loan is automatically repaid with the next paycheck

• The borrower receives the full amount upfront and repays over a fixed period

• The borrower can use as much money as needed up to a certain limit

• The interest rate varies based on the stock market

What is required for a borrower to qualify for a deposit advance?

• A co-signer with a good credit history

• Collateral, such as a car or house

• A checking account and a history of regular electronic deposits

• A high credit score

What is a unique feature of peer-to-peer (P2P) lending platforms?

• They only provide loans for educational purposes

• They offer loans without interest

• They allow borrowers and lenders to negotiate loan terms directly

• They require borrowers to have at least a 650 credit score