Module 3

Question 1

Two types of consumer credit

Answer 1

1. installment creidt
2. non installment credit

Question 2

is non business debt use by consumers for expenditures other than home mortgages

Answer 2

consumer credit

Question 3

the borrower must repay the amount owed plus interest in specific interest in a specific number of equal payments, usually monthly

Answer 3

installment credit (close-end credit)

Question 4

are the easiest of the three to understand

Answer 4

single payment loans

Question 5

includes single-payment open-ended credit, and service credit.

Answer 5

non installment credit

Question 6

credit is extended in advance of any transactions so that the borrower doesn’t need to reapply each time credit is desired

Answer 6

open-ended credit (revolving credit)

Question 7

is a form of open-ended credit that allows the borrower
access to the prearranged revolving line of credit provided by the lender (usually
a commercial bank, savings bank, credit union, or brokerage firm).

Answer 7

personal line

Question 8

several reasons for using credit

Answer 8

1. To avoid paying cash for large outlays
2. To meet a financial emergency
3. For convenience
4. For investment purposes

Question 9

– key factor in defining borrower’s willingness to live up to the terms of
the loan.

Answer 9

character

Question 10

the ability of the borrower to service the loan in a timely fashion.

Answer 10

capacity

Question 11

something of value that’s used to secure loan and that lender can claim in case of default

Answer 11

collateral

Question 12

the amount of unencumbered assets owned by the borrower, used as
another indicator of the borrower’s ability to repay the loan.

Answer 12

capital

Question 13

the extent of which prevailing economic conditions could affect the
borrower’s ability to service a loan.

Answer 13

condition

Question 14

types of credit card accounts

Answer 14

bank credit cards
travel and entertainment (T&E) cards

Question 15

is an open-ended credit accounts at a financial
institution allowing the holder to make purchases on a credit card in almost
anywhere. These companies contract with Visa, MasterCard, and a bank to offer
these cobranded credit cards.

Answer 15

bank credit card

Question 16

Are similar to bank credit cards in that the allow holders to make purchases at
numerous businesses.

Answer 16

travel and entertainment (T&E) cards

Question 17

(also called a
periodic statement) that summarizes the charges, the payments, finance
charges, and other activity on the account

Answer 17

credit statement

Question 18

The date on which a credit cardholder makes purchase (or receives a credit) is
known as the

Answer 18

transaction date

Question 19

Credit card companies usually charge whenever the card is used for a balance transfer of cash advance.

Answer 19

transaction fees

Question 20

the borrower receives cash and uses it to make purchases, pay off
other loans, or make investments

Answer 20

cash loan

Question 21

(also called sales credit), the consumer makes a purchase on
credit with no cash transferring from the lender to the borrower. Instead, the funds go
directly from the lender to the seller.

Answer 21

purchase loan

Question 22

(a written
installment loan contract) that spells out the terms of the loan.

Answer 22

promissory note

Question 23

is granted solely based on the good credit character of the
borrower. Sometimes called signature loans because they are
backed up by only the borrower’s signature.

Answer 23

unsecured loans

Question 24

requires cosigner or collateral. A cosigner agrees to pay the debt if
the original borrower fails to do so.

Answer 24

secured loans