Understanding Consumer Credit

What is consumer credit primarily used for?

• Corporate financing

• Agricultural purposes

• Personal needs

• Business investments

Which of the following is an example of closed-end credit?

• Credit card

• Mortgage loan

• Overdraft protection

• Revolving check credit

What is a characteristic of open-end credit?

• Fixed payment amounts

• Specific purpose and amount

• Continuous borrowing

• Lien on purchased goods

Which type of card requires full payment each month but does not charge interest?

• Credit card

• Debit card

• Charge card

• Travel and Entertainment card

What is a secured loan?

• A loan with no collateral

• A loan with a co-signer

• A loan backed by collateral

• A loan with a high interest rate

What is a risk of cosigning a loan?

• You gain ownership of the property

• You are not responsible for repayment

• You may have to repay the loan

• Your credit record is unaffected

Which institution typically offers lower interest rates due to lending depositors' money?

• Commercial banks

• Credit unions

• Consumer finance companies

• Savings and Loan Associations

What is a characteristic of consumer finance companies?

• They offer the lowest interest rates

• They only lend to established credit holders

• They require collateral for all loans

• They specialize in personal installment loans

Which of the following is NOT a source of consumer credit?

• Family and friends

• Loan sharks

• Pawnbrokers

• Federal Reserve

What is a disadvantage of consumer credit?

• It is always secured

• It improves credit scores

• It can lead to over-borrowing

• Interest is tax-deductible