501-504 Vocabulary Practice Quiz (Credit Basics & Credit Cards)

What is collateral in the context of credit?

• The total wealth of an individual or organization.

• An asset that a lender accepts as security for a loan.

• The amount of money borrowed.

• A small loan offered through a business.

What does a fixed rate imply in a loan?

• The interest rate changes based on the debt size.

• The interest rate varies each pay period.

• The interest rate remains constant during the duration of the loan.

• The interest rate is extremely high and must be paid by the next paycheck.

What is an installment loan used for?

• To pay the interest on a loan only.

• To finance a specific purchase for a set amount of time with regular payments.

• To borrow money without any interest.

• To provide a line of credit for any purchases.

What is the definition of interest?

• The total wealth of an individual minus liabilities.

• A sum paid for borrowing money, calculated as a percentage rate.

• The amount of money lent by an organization.

• A specific asset used as collateral.

Who is considered a lender?

• An individual or organization that borrows money.

• An individual or organization that lends money.

• An individual or organization that provides collateral.

• An individual or organization that charges a high interest rate for small loans.

What does net worth represent?

• The interest rate charged for borrowing money.

• The amount of money borrowed.

• The total wealth of an individual or organization, minus liabilities.

• An asset accepted as security for a loan.

What is a payday loan?

• A loan with a variable interest rate.

• A loan used to finance a specific purchase.

• A small loan with a high interest rate meant to be paid by the next paycheck.

• A loan that remains constant during its duration.

What does the principal of a loan refer to?

• The asset used as collateral.

• The high interest rate charged for a loan.

• The amount of money borrowed.

• The total wealth of an individual or organization.

What is the rate or interest rate in the context of borrowing money?

• The line of credit that can be used for any purchases.

• The asset that can be used as collateral.

• The percentage that a financial institution charges for borrowing money.

• The total wealth of an individual or organization.

What is revolving credit?

• A loan with a fixed interest rate.

• An open line of credit that can be used as long as you're under the credit limit.

• The amount of money borrowed.

• A specific asset used as collateral.