Loans Personal Loans 3

Question 1

What document do lenders most commonly require to verify a personal loan applicant's income?

Accepted Answer

Recent pay stubs or tax returns

Answer

Lenders typically verify income through recent pay stubs, W-2 forms, or tax returns to assess a borrower's ability to repay.

Question 2

A co-signer on a personal loan is responsible for:

Accepted Answer

Repaying the loan if the primary borrower defaults

Answer

A co-signer is equally legally liable for the loan and must repay it if the primary borrower fails to do so.

Question 3

Which law prohibits lenders from discriminating against loan applicants based on race, color, religion, national origin, sex, marital status, or age?

Accepted Answer

Equal Credit Opportunity Act (ECOA)

Answer

The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating against applicants on the basis of protected characteristics.

Question 4

What is the purpose of a loan amortization schedule?

Accepted Answer

It lists each payment's breakdown of principal and interest over the loan term

Answer

An amortization schedule details how each periodic payment is split between paying down principal and covering interest charges.

Question 5

If a personal loan has a fixed interest rate, what does that mean for the borrower?

Accepted Answer

The monthly payment amount stays the same throughout the loan term

Answer

A fixed interest rate means the rate and monthly payment remain constant for the entire loan term, making budgeting predictable.

Loans Practice Test