WorksheetsWise Practice: Credit & Loans
Total questions: 30
Worksheet time: 15mins
If a person earns $50,000 a year, has total assets of $250,000 and liabilities of $140,000, their net worth is
$50,000
$110,000
$160,000
$250,000
A person has two credit cards with the same balance. Credit card A has an APR of 18% and credit card B has an APR of 12%. Their monthly budget includes $300 for credit card payments, and they want to pay a minimum of $100 on each. Which of the following is recommended?
Pay $100 on card A and $200 on card B.
Pay $200 on card A and $100 on card B.
Pay $150 on each card.
Pay $100 on each and leave the remaining funds in their checking account.
What factor can potentially contribute to a person securing a favorable interest rate on a loan?
A high checking account balance.
A good credit rating.
A high income.
A college degree.
A person can establish credit by
Opening multiple bank accounts to build a strong financial history.
Accumulating debt on credit cards from multiple lenders.
Making timely payments on loans and bills to build a positive credit history.
Avoiding all forms of borrowing to maintain a pristine credit record.
The person with a variable interest rate on a loan can potentially expect their payment to
Fluctuate as interest rates change.
Vary based on their monthly budget.
Remain constant over the life of the loan.
Decrease over the life of the loan.
Which of the following best describes the implications of taking out a loan for the maximum term allowed?
It minimizes the total amount of interest paid over the life of the loan.
It increases the monthly payments, making it easier to manage.
It accelerates the repayment process, allowing room for a new loan.
It extends the repayment period, resulting in higher overall interest costs.
Which of the following best describes how long information typically stays on a credit report?
Information stays on a credit report for a maximum of one year.
Information stays on a credit report indefinitely, regardless of the impact.
Positive information stays on a credit report longer than negative information.
Most negative information stays on a credit report for up to seven years.
What should a person consider before using a credit card for cash advances?
Cash advances incur lower interest rates than regular purchases.
Cash advances incur higher interest rates than regular purchases.
Cash advances offer longer repayment options than regular purchases.
Cash advances do not affect your credit score.
If a person makes too many late payments on a credit card, the credit card company may
Reduce the interest rate to incentivize timely payments.
Request immediate payment of the full balance on the account.
Increase the credit limit to encourage responsible spending.
Raise the interest rate, resulting in higher costs for the cardholder.
A person takes out a short-term loan in the amount of $1,000 over a 6-month period. The total of their monthly payments over this period is $1,070 because
In addition to the principal, they incurred $70 in interest on the loan.
They added a gratuity of $70 for the lender’s service.
The $70 will be added to their emergency fund.
In addition to the principal, they incurred $70 in taxes on the loan.
A person takes a valuable watch to a pawn shop, receives cash in return, and collects the watch when they make full payment for the agreed amount to the shop. In this case, the watch is considered _________ for the loan.
Interest
Collateral
Principal payment
Deposit
After graduating, what typically happens to a person who received a loan to pay for the cost of an undergraduate degree?
The loan is automatically forgiven.
The person must begin making loan payments.
The person automatically receives additional loan funds for graduate school.
The person’s credit score decreases.
What is the primary difference between a loan and grant to pay for college?
Grants require repayment with interest, while loans do not.
Loans provide funds upfront, while grants require work-study arrangements.
Grants are typically awarded based on financial need and do not require repayment, while loans must be paid with interest.
Loans are awarded solely based on academic merit, while grants are based on extracurricular activities.
What is APR?
The number of payments required to pay off a loan.
The total amount of money borrowed.
The cost of borrowing money annually, including interest and fees.
The amount of money earned on a deposit.
The Truth in Lending Act is a law _______________________
Requiring lenders to provide borrowers with accurate information about loan terms and costs.
Prohibiting lenders from discriminating against potential borrowers.
Requires lenders to disclose how customer personal information is used.
Requiring borrowers to disclose non-payment to the credit bureaus.
For which purpose might a person prefer to get a loan?
To decrease personal debt.
To increase savings.
To purchase a home.
To donate to charity.
An installment loan is a loan _______________________
That must be repaid in full within a short period of time.
Where the monthly payment is the same over the repayment period.
Used to pay for upgrades to a person’s primary residence.
Where a person makes a minimum payment monthly to keep the loan current.
Which of the following is an example of a revolving credit?
A car loan.
A mortgage.
A credit card.
A student loan.
Which of the following represents a best practice for managing credit cards?
Carrying a balance on the credit card and paying only the minimum amount due.
Making only sporadic payments on the credit card balance.
Paying the credit card balance in full each month to avoid interest charges.
Ignoring credit card statements and not making any payments.
What advice might best serve a person on how to manage credit cards while sticking to a budget?
Apply for multiple credit cards to increase spending flexibility.
Use credit cards for all purchases to earn rewards.
Set a monthly spending limit on credit cards and track expenses closely.
Max out credit card limits to build a strong credit history.
Which item is not a factor in determining a person’s credit score?
Income.
Payment history.
Credit utilization.
Length of credit history.
What might a person still be responsible for when they file bankruptcy?
All debts are completely forgiven.
Mortgage payments.
Revolving credit balances.
Taxes.
Why might a lender require collateral for a loan?
To increase the borrower’s credit limit.
To provide additional funds to the borrower.
To reduce the risk associated with the borrower defaulting on the loan.
To decrease the interest rate on the loan.
Which of the following best describes the impact on a person who co-signed a loan that was not repaid by the borrower?
The co-signer’s credit score will increase.
The co-signer is not affected.
The co-signer's credit score may decrease, and they could be responsible for repaying the loan.
The lender will waive the loan repayment for the co-signer.
Consumers who file for bankruptcy are still responsible for:
Mortgage loans
Credit card balances
Tax claims and student loans
Car loans
What is meant by an uncollateralized loan?
A loan not backed by a co-signer who agrees to cover the amount of the loan.
A personal loan without assets to cover the loan amount.
A home equity loan.
A loan taken on a life insurance policy.
When a person declares bankruptcy that fact will appear on the person's credit report
for a 3 year period.
for a 10 year period.
until the person repays all debts owed.
until the person is able to receive a new credit card.
Which of the following is considered to be open-end credit?
A mortgage
A car loan
Department store charge cards
Installment loans.
A person has three credit cards with very large outstanding balances and is unable to make payments on any of them. Which action should the person take?
Notify a credit reporting agency in order to avoid a late fee.
File for bankruptcy in order to maintain ones current credit score.
Notify the credit card companies in order to negotiate a new payment plan.
Contact the Internal Revenue Service in order to avoid paying income tax this year.
Ellen, Barbara, and Paul all charged $1,000 on their credit cards last year. Who paid the most in finance charges?
Ellen, who generally pays off her credit card in full but occasionally will pay the minimum when she is short of cash
Barbara, who always pays off her credit card bill in full after she receives it.
Paul, who only pays the minimum amount each month.
They all paid about the same since the method of payment per month does not influence the finance charge.
