Practice Quiz for Unit 3

What is a common type of bank loan used for purchasing a home?

• Payday Loan

• Mortgage Loan

• Title Loan

• Peer to Peer Loan

Which of the following is a characteristic of payday loans?

• Long repayment terms

• High interest rates

• Secured by collateral

• Issued by peer lenders

In peer to peer lending, who provides the funds for the loan?

• Banks

• Individual investors

• Credit unions

• Government agencies

Which of the following best describes secured credit?

• Credit that does not require collateral

• Credit that requires collateral

• Credit with a fixed interest rate

• Credit with a variable interest rate

What is a key feature of revolving credit?

• Fixed monthly payments

• A set loan term

• Ability to borrow repeatedly up to a limit

• Requires collateral

How does installment credit differ from revolving credit?

• Installment credit has a variable interest rate

• Installment credit requires a single lump sum payment

• Installment credit involves regular, fixed payments over time

• Installment credit allows borrowing up to a credit limit

Which of the following is an example of an unsecured loan?

• Mortgage

• Auto loan

• Personal loan

• Home equity loan

Why might someone choose a peer to peer loan over a traditional bank loan?

• Lower interest rates

• Longer repayment terms

• More stringent credit requirements

• Less flexibility in loan amounts

What is a potential risk of taking out a payday loan?

• Low interest rates

• Long repayment period

• Debt cycle due to high fees

• Requirement of collateral

How does secured credit benefit the lender?

• It offers higher interest rates

• It reduces the risk of default

• It requires no credit check

• It allows for flexible repayment terms