AFIP Credit and Lending Products Flashcards
6 cards from real AFIP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 AFIP Credit and Lending Products flashcards as text
What is the primary purpose of a dealer reserve in an auto finance transaction?
Answer: To compensate the dealer for arranging the financing
Dealer reserve is the difference between the buy rate offered by the lender and the contract rate charged to the customer, and it compensates the dealer for arranging the loan.
Which federal law requires creditors to disclose the Annual Percentage Rate (APR) to borrowers before consummation of a loan?
Answer: Truth in Lending Act (TILA)
The Truth in Lending Act (TILA), implemented by Regulation Z, mandates disclosure of the APR and other key loan terms before the borrower is bound.
A customer has a credit score of 580. In auto lending, this score typically falls into which tier?
Answer: Subprime
Scores below approximately 620 are generally classified as subprime, indicating higher default risk to lenders.
What does Loan-to-Value (LTV) ratio measure in an auto loan?
Answer: The loan amount compared to the vehicle's value
LTV is the loan amount divided by the vehicle's value, and lenders use it to gauge collateral coverage and risk.
Which of the following is an example of an open-end credit product offered in F&I?
Answer: Home equity line of credit (HELOC)
A HELOC is open-end credit because the borrower can draw, repay, and redraw up to a set limit, unlike a closed-end installment loan.
In a simple interest auto loan, how is interest calculated each month?
Answer: On the remaining principal balance at the time of the payment
Simple interest loans accrue interest daily on the outstanding principal balance, so early or extra payments reduce total interest paid.