U.E.T Taxila

COURSE TITLE : FREE 101

TRUE/FALSE QUESTIONS 1 TO 51

Chapter 05

1)Consumer credit refers to the use of debit cards for personal needs. .

2. Consumer credit dates back to colonial times when it was extensively used by farmers.

3. Consumer credit allows businesses to be more efficient or more productive.
4. Economists recognize consumer credit as a major force in the American economy.

5. When used effectively, credit can help a consumer have more and enjoy more.

6. A trade off of credit is that it increases the amount of money that will be available to spend in the future.                    
7. A disadvantage of using credit is its use when making a hotel reservation.

8. During the grace period, finance charges are assessed at only half the normal rate.

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9. Credit can indicate stability since lenders consider you a good risk.
10. Although credit allows immediate satisfaction of needs and desires, a greater advantage is that it increases total purchasing power. 
11. Closed-end credit consists of loans made on a continuous basis with periodic bills for at least partial payment.                         
12. Open-end credit consists of loans made on a continuous basis with periodic bills for at least partial payment.                                   
13. Closed-end credit is used for a specific purpose and involves a specific amount.

14. Installment sales credit is a loan that allows a consumer to purchase high-priced items.

15. A consumer applies for open-end credit to make a single purchase, such as a large appliance.

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16. The least expensive loans are often provided by parents or other family members.

17. The most expensive loans are often provided by parents or other family members.

18. The easiest loans to obtain are also the least expensive.                                
19. Interest paid on a credit card is tax-deductible.                                 
20. A credit card holder who pays the full balance during the grace period each month is actually getting a free loan from the credit card company.                                                 
21. A secured credit card is most appropriate for someone with a strong credit background.

22. Experts suggest that you spend more than 20 percent of your after-tax (net) income on consumer credit payments.                                
23. The debt-to-equity ratio is calculated by dividing your total liabilities, including mortgage, by net worth.                          

The ratio excludes mortgage.

24. In the five Cs of credit, character refers to the borrower's trustworthiness and stability.

25. In the five Cs of credit, capacity refers to the borrower's trustworthiness and stability.

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26. In the five Cs of credit, capital refers to the borrower's ability to pay additional debts.

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27. In the five Cs of credit, conditions refer to what will happen if the borrower does not repay the loan.        

28. The Equal Credit Opportunity Act requires that a lender not turn you down for credit based on your age as long as you are old enough to sign a legal contract, which is usually allowed at age 16.       
29. FICO and Vantage Score are two methods used to judge creditworthiness.

30. FICO is a better score to use than Vantage Score for consumers with limited credit histories.

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31. The higher your FICO score, the more risk you pose to creditors.                                     
32. A credit file can include your spouse's name and Social Security number.
33. The Fair Credit Reporting Act, enacted in 1971, places limits on who can obtain your credit report.    
34. A bankruptcy remains on a credit file for no more than 5 years.                                  
35. Most information in your credit file may be reported for only 7 years.                                      .
36. You have a legal right to sue a credit bureau if you observe an error in your file.

37. The Annual Percentage Rate is lower than the stated rate for loans that are repaid in monthly payments.         
38. The longer the term for a loan at a given interest rate, the higher the overall interest charges.

39. The add-on interest calculation uses the formula: Interest = Principal × Rate of interest

×Time         

40. The amount of interest paid is independent of the length of the loan.

41. The Truth in Lending Act requires that creditors explain how they calculate the finance charge.        
42. The expected rate of inflation should not be considered when determining the amount of interest a creditor should charge.                        
43. The longer it takes for you to pay off a bill, the less interest you pay.                                     
44. If you purchase something with a credit card, the finance charges you pay on an item could end up being more than the item is worth.                                          
45. According to law, a creditor may threaten your credit rating while you are negotiating a billing dispute.                             
46. According to the Fair Credit Billing Act from 1975, a creditor must adjust the disputed amount in your account or tell you why the bill is correct within 30 days.

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47. According to the Fair Credit Billing Act from 1975, a consumer may tell his credit card company to stop payment for a defective good if he made a sincere attempt to resolve the problem with the store.                                                                                           
48. The first sign of stolen identity might be that you get bills for a credit card account that you never opened.                       
49. If you are a cosigner for a loan and the debt is not repaid, then that fact will appear on your credit report.                               
50. You should keep a record of your credit card number separate from your card.

51. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it easier for consumers to file Chapter 7 bankruptcy.                           

52. Installment credit exploded on the American scene with the advent of the

53. Which of the following expressions is correct?
54. Which of the following is a valid reason for borrowing?
55. Which of the following is NOT a valid reason for borrowing?

56. Many people expect
57. Which of the following questions is NOT needed before deciding how and when to make a major purchase?
58. When used effectively, credit can result in
59. Which of the following is NOT correct?
60. Which of the following is NOT correct?
61. A typical grace period for many credit card issuers is
62. Many think that perhaps the greatest disadvantage of using credit is
63. Failure to repay a loan may lead to all except:
64. Consumer credit
65. Before buying goods and services on credit, a consumer should consider all except:

66. Which of the following is an example of closed-end credit?
67. Which of the following is an example of open-end credit?

68. A direct loan for personal purposes, home improvements or vacation expenses is called
69. A loan that must be repaid in total on a specified day, usually within 30 to 90 days is
70. Molly purchased a $1,500 HDTV from Best Appliances. She will make 12 equal payments over the next year to pay for it. She is using
71. A line of credit is
72. A prearranged loan up to a specified amount that a consumer can access by writing a special check is known as
73. The periodic charge for the use of credit is
74. Which is often considered to offer the least expensive loans?
75. A cash advance
76. Home equity loans should be used for
77. Home equity loans
78. If you miss payments on a home equity loan, you can lose your
79. A credit cardholder who pays off his balances in full each month is known as

80. Which of the following is NOT associated with credit cards?
81. Which of the following electronically subtracts money from your savings or checking account to pay for goods and services?
82. Bankruptcy courts treat gift cards
83. Before taking out a loan, you should ask yourself whether you can meet all of your essential expenses and still afford the monthly loan payments. This can be determined by:                                                                     
84. Experts suggest that the debt payments-to-income ratio should be a maximum of
85. If you have reached the upper limit of debt obligations, your debt-to-equity is about
86. When calculating the debt-to-equity ratio, the following is NOT included:
87. The question "will you repay the loan?" relates to
88. The question "what are your assets and net worth?" relates to                                
89. The use of property or savings to secure a loan relates to
90. A loan officer is examining whether or not he/she will offer you a loan today. Specifically, he/she is examining your income and debts. Which of the five Cs is the loan officer reviewing?
91. The Equal Credit Opportunity Act (ECOA) prohibits a lender from discriminating based on
92. Which of the following is the best scoring technique used in credit applications for consumers with limited credit histories?