Ch 5: Consumer Loans

What is the primary purpose of consumer loans?

• To finance household and personal needs

• To invest in corporate stocks

• To fund business operations

• To finance productive purposes

Which of the following is NOT a type of consumer loan?

• Personal loans

• Credit cards

• Overdrafts

• Business loans

What is a characteristic of secured loans?

• They are always short-term

• They have higher interest rates

• They are backed by assets

• They do not require collateral

Which of the following is a precaution to take when granting consumer loans?

• Ignoring the borrower's credit history

• Conducting proper searches for bankruptcy

• Allowing verbal agreements

• Skipping documentation

What does the '3 Cs' in evaluating consumer loans stand for?

• Character, Capacity, Collateral

• Character, Cost, Credit

• Credit, Cost, Compliance

• Conditions, Criteria, Collateral

What is a common term for loans with repayment periods of 2-5 years?

• Short-term loans

• Personal loans

• Long-term loans

• Revolving credit

Which of the following is a benefit of credit cards for consumers?

• High annual fees

• Mandatory monthly payments

• Limited usage

• Convenience

What is the purpose of credit scoring in loan applications?

• To increase loan fees

• To handle applications quickly

• To reduce the number of applicants

• To eliminate all risks

What is a fixed interest rate loan?

• A loan with constant rates

• A loan with changing rates

• A loan with no interest

• A loan with variable fees

Which law affects consumer loans?

• Employment Law

• Corporate Tax Act

• National Credit Code

• Environmental Protection Act