CHAPTER 5: MANAGING CREDIT

1. What do you call the ability of a consumer to acquire a loan through a bank or other financial institution? It is also known as the 'consumer debt'.

• A. ​Consumer Credit Plan

• B. Consumer Credit

• C. ​Credit Card

• D. ​Consumer Loan

• E. Short-term Loan

2. ​Consumer credit has three broad types. Which among the choices below is not considered as one of its three broad types?

• A. ​Pre-installment credit

• B. ​Revolving credit

• C. ​Installment credit

• D. Non-installment loan

• E. None of the above

3. Helps individuals to borrow responsibly and avoid being financially unstable.

• A. Consumer credit

• B. Consumer Companies

• C. Consumer credit plan

• D. Consumer plan

• E. Financial plan

4. Refers to an individual ability to pay loans. It is also defined by factors such as your credit score, income stability, DTI ratio and credit history.

• A. Credit score

• B. Credit plan

• C. Credit rights

• D. Credit worthiness

• E. Credit

5. Which of the following is an advantage of using a credit card?

• A. High interest rates may cause debt accumulation if balances are unpaid.

• B. Negative impact on credit score from late payments or maxing out credit limits.

• C. Temptation to overspend.

• D. Convenience and easy access.

• E. Easy to forget and to get lost.

6. This type of loan can be used for almost anything, such as medical bills, home improvement, travel, or emergencies.

• A. Credible Loan

• B. Mortgage Loan

• C. Student Loan

• D. Secured Loan

• E. Personal Loan

7. Leonard wants to take a loan. His ideal loan is something that can be paid monthly with a specific and unchanging amount of payment. What type of consumer loan should Leonard take?

• A. Evolving Credit

• B. Installment Credit

• C. Non-installment Credit

• D. Specific Credit

• E. None of the above

8. Audrey is in need of money to fund her new business venture. She believes that this venture will be greatly successful and will generate huge income. With that in mind, Audrey was even willing to give this very own business as collateral for the said loan. She was very thorough about her plan and already has an idea of what type of loan she will take. What do you think is the best type of loan that Audrey should take?

• A. Mortgage Loan

• B. Auto Loan

• C. Secured Loan

• D. Unsecured Loan

• E. All of the above

9. Which is a major disadvantage of revolving credit?

• A. Less flexible repayment options

• B. Higher interest rate and risk of overspending

• C. One-time repayment required

• D. No interest charged

• E. Very low borrowing limit

10. ​They are nonprofit lenders that are part of a company or a group that gives out affordable credit options to fellow group members.

• A. Loan ​Sharks

• B. ​Life Insurance Companies

• C. ​Consumer Finance Companies

• D. Banks

• E. ​Credit Unions