CCDS Consumer Debt Products & Interest Calculations 3

Question 1

Which of the following best describes a home equity line of credit (HELOC)?

Accepted Answer

A revolving credit line secured by the borrower's home equity

Answer

A fixed-rate installment loan secured by equity in a home

Answer

An unsecured personal line of credit with variable rates

Answer

A government-backed loan for first-time homebuyers

Question 2

A consumer's credit utilization ratio is calculated as:

Accepted Answer

Total revolving balances divided by total revolving credit limits

Answer

Total debt divided by annual income

Answer

Monthly payment divided by monthly gross income

Answer

Number of open accounts divided by total accounts

Question 3

Under the CARD Act, how much advance notice must a credit card issuer provide before increasing a cardholder's interest rate?

Accepted Answer

45 days

Answer

15 days

Answer

30 days

Answer

60 days

Question 4

A consumer owes $8,000 on a credit card with 20% APR and makes only the minimum payment of 2% of the balance each month. The primary risk is:

Accepted Answer

The consumer will pay far more than $8,000 in total due to interest accumulation

Answer

The balance will be paid off quickly

Answer

The account will be closed for inactivity

Answer

The credit limit will automatically decrease

Question 5

Which type of student loan carries a fixed interest rate set by Congress and is not based on the borrower's credit history?

Accepted Answer

Federal Direct Loan

Answer

Private student loan

Answer

Home equity loan used for education

Answer

Personal installment loan

Question 6

A balloon loan is characterized by:

Accepted Answer

A large lump-sum payment due at the end of the loan term

Answer

Increasing monthly payments over the loan term

Answer

Monthly payments that cover only the interest

Answer

Equal principal payments with declining interest

Question 7

When a creditor 'charges off' a consumer debt, it means the creditor has:

Accepted Answer

Written the balance off as a loss for accounting purposes, but the debt remains legally owed

Answer

Legally forgiven the debt and the consumer owes nothing

Answer

Agreed to a reduced settlement amount

Answer

Transferred the debt to a government collection agency