Open-end Credit Quiz

Questions and Answers

What is open end credit?

A pre-approved loan that can be used repeatedly up to a certain limit. (correct)

A loan that requires collateral.

A type of credit that has no borrowing limits.

A loan that must be paid back in full immediately.

What does the annual percentage rate represent?

The actual yearly cost of funds over the term of a loan.

The ______ period refers to a period of time before loan payments are due.

grace

What is closed end credit?

A loan that must be repaid with interest by a specified date. Signup and view all the answers

What is a finance company?

A non-bank financial institution that provides banking services without a banking license. Signup and view all the answers

A loan shark charges low interest rates.

False Signup and view all the answers

What do usury laws regulate?

The amount of interest that can be charged on a loan. Signup and view all the answers

What is a pawnbroker?

A person who lends money at interest on the security of an article pawned. Signup and view all the answers

What are service credits?

Financial transactions credited to the customer due to service failures. Signup and view all the answers

Study Notes

Open-End Credit

Open-end credit is a pre-approved loan allowing borrowers to repeatedly access funds up to a specified limit.
Borrowers can pay back the credit before due payments, offering flexibility in fund usage.
The pre-approved amount is defined in the agreement between lender and borrower.

Annual Percentage Rate (APR)

APR represents the yearly cost of borrowing money, expressed as a single percentage.
It includes all fees and additional costs associated with the loan or investment.

Grace Period

A grace period is a designated time during which a borrower can make payments without incurring penalties.
The term can also refer to the elegant and refined movement in certain contexts.

Closed-End Credit

Closed-end credit involves a one-time loan where funds are fully disbursed at closing.
The borrower must repay the loan, along with interest and finance charges, by a predetermined date.

Finance Company

Non-bank financial companies (NBFCs) offer banking services without having a banking license.
These institutions may be restricted from taking public deposits, depending on local regulations.

Loan Shark

A loan shark refers to a moneylender who charges excessively high interest rates, typically in illegal circumstances.

Usury Laws

Usury laws regulate the maximum interest rates that can be charged on loans.
These laws exist to prevent the practice of charging prohibitively high rates.

Pawnbroker

A pawnbroker is a lender who provides funds based on the security of an article pawned by the borrower.
The article serves as collateral for the loan, allowing the pawnbroker to sell it if the borrower fails to repay.

Service Credit

Service credits are financial compensations given directly to customers when a service provider fails to meet performance standards.
They are designed to address unexcused failures related to key performance indicators or service level agreements.

Description

Test your knowledge on open-end credit and its financial terminology. This quiz includes key concepts such as annual percentage rates and their implications. Perfect for students or anyone interested in finance.