LIBF Unit 3 Topic 5 Quiz

What is the primary benefit of borrowing money according ?

• It allows for immediate purchase of items without saving.

• It increases monthly income.

• It eliminates the need for budgeting.

• It reduces overall debt.

What is a common example of borrowing property?

• Car loan

• Mortgage loan

• Student loan

• Payday loan

What is a potential consequence of not repaying a secured loan?

• Loss of the secured asset

• Increase in interest rates

• Extension of loan term

• Reduction in monthly payments

What happens if a borrower stops meeting repayments on a secured loan?

• The asset may be lost

• The loan is forgiven

• Interest rates decrease

• The loan term is extended

What is a 'financial footprint' as mentioned in the text?

• A record of borrowing and repayment history

• A type of loan

• A savings account

• A credit card feature

What is an Informal Payment Plan?

• A legal agreement between debtor and creditor

• A plan to negotiate lower monthly payments over a longer period

• A court order to pay debts

• A method to avoid paying any debts

What is a Debt Relief Order (DRO)?

• A method to increase debt

• A legal requirement to pay debts immediately

• An alternative to IVA or bankruptcy for low-level debts

• A plan to borrow more money

What is the purpose of a Debt Management Plan (DMP)?

• To increase the amount of debt

• To provide free help to set up and maintain a formal DMP

• To avoid paying any debts

• To negotiate higher monthly payments

What is the role of an insolvency practitioner (IP) in an IVA?

• To grant loans

• To supervise the IVA and examine the debtor’s finances

• To blacklist the debtor

• To increase the debtor's income

What is the significance of a creditor accepting a reduced monthly payment?

• It increases the total debt

• It helps the debtor manage their finances better

• It leads to immediate debt clearance

• It results in higher interest rates