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 HELOC is a revolving credit facility secured by the borrower's home equity, allowing draws up to a set limit during the draw period.

Question 2

A consumer's credit utilization ratio is calculated as:

Accepted Answer

Total revolving balances divided by total revolving credit limits

Answer

Credit utilization = total revolving balances ÷ total revolving credit limits, expressed as a percentage, and significantly impacts credit scores.

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

The Credit CARD Act requires issuers to provide at least 45 days advance notice before increasing the APR on future purchases.

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

Minimum-only payments on high-APR balances extend repayment for decades and multiply the total interest paid, often several times the original principal.

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

Federal Direct Loans have congressionally set fixed rates and require no credit check, unlike private student loans that are credit-based.

CCDS - Certified Consumer Debt Specialist Practice Test

CCDS - Certified Consumer Debt Specialist Practice Test

CCDS Consumer Debt Products & Interest Calculations 3