AFIP AFIP Credit and Lending Products 1

Question 1

What is the primary purpose of a dealer reserve in an auto finance transaction?

Accepted Answer

To compensate the dealer for arranging the financing

Answer

To fund the vehicle's warranty

Answer

To cover the lender's loan origination costs

Answer

To provide gap insurance to the buyer

Question 2

Which federal law requires creditors to disclose the Annual Percentage Rate (APR) to borrowers before consummation of a loan?

Accepted Answer

Truth in Lending Act (TILA)

Answer

Equal Credit Opportunity Act

Answer

Fair Credit Reporting Act

Answer

Gramm-Leach-Bliley Act

Question 3

A customer has a credit score of 580. In auto lending, this score typically falls into which tier?

Accepted Answer

Subprime

Answer

Prime

Answer

Super-prime

Answer

Near-prime

Question 4

What does Loan-to-Value (LTV) ratio measure in an auto loan?

Accepted Answer

The loan amount compared to the vehicle's value

Answer

The borrower's monthly payment relative to income

Answer

The interest rate relative to the prime rate

Answer

The dealer's profit margin on the deal

Question 5

Which of the following is an example of an open-end credit product offered in F&I?

Accepted Answer

Home equity line of credit (HELOC)

Answer

Retail installment contract

Answer

Student loan

Answer

Auto lease

Question 6

In a simple interest auto loan, how is interest calculated each month?

Accepted Answer

On the remaining principal balance at the time of the payment

Answer

On the original loan amount regardless of payments made

Answer

On the total interest contracted at origination divided equally

Answer

On the dealer's buy rate rather than the contract rate