Consumer Loans and the Loan Process
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Questions and Answers

Which of the following is a feature of a loan?

  • Credit score
  • Principal (correct)
  • Interest rate
  • Loan application

    • What is the difference between a secured loan and an unsecured loan?

  • Secured loans require collateral, while unsecured loans do not require collateral. (correct)
  • Secured loans have shorter terms, while unsecured loans have longer terms.
  • Secured loans are reported to credit bureaus, while unsecured loans are not reported.
  • Secured loans have higher interest rates, while unsecured loans have lower interest rates.

    • What is the difference between a fixed rate and a variable rate loan?

  • A fixed rate loan has a lower interest rate than a variable rate loan.
  • A fixed rate loan does not change during the length of the loan, while a variable rate loan can change. (correct)
  • A fixed rate loan can change during the length of the loan, while a variable rate loan does not change.
  • A fixed rate loan has a longer term than a variable rate loan.

    • Which of the following is true about the Annual Percentage Rate (APR)?

    <p>APR is the interest rate plus the fees associated with the loan</p> Signup and view all the answers

    What does compound frequency represent?

    <p>The number of compounding periods in a year</p> Signup and view all the answers

    What happens to the interest portion and principal portion of a payment in an amortized loan?

    <p>Interest portion decreases, principal portion increases</p> Signup and view all the answers

    What is a payday loan?

    <p>A very short-term loan with extremely high interest</p> Signup and view all the answers

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