Loan Terminology Quiz

What is a secured loan?

• A loan that is backed by something you owe.

• A loan that is guaranteed by your signature.

• A loan that is backed by a co-signer.

• A loan that is backed by something you own.

What is the best definition of 'interest'?

• The amount paid by the borrower's reference

• The amount paid by the borrower to complete an application

• The amount paid by the lender to loan money

• The amount paid by the borrower to borrow money

Which statement best describes the correlation between maturity and interest rates?

• The later the maturity date, the less interest you pay.

• The percentage between the maturity date and calendar year is equal to the interest rate.

• Later maturity dates usually have higher individual payments.

• The later the maturity date, the more interest you pay.

What is the correlation between credit score and interest rate?

• If your credit score is high, the interest rate will be low.

• Having a high interest rate will increase your credit score.

• If your credit score is high, the interest rate will be high.

• If your credit score is low, the interest rate will be low.

Fred always asks for references before issuing a loan. Why might he require references?

• References serve as a point of contact if you stop making payments and the lender cannot find you.

• References can confirm your identity and personal information better than a driver's license.

• You must supply names and contact information for your references on a loan application.

• References are always required for secured personal loans.