Loans Personal Loans

Question 1

What is the primary difference between a secured personal loan and an unsecured personal loan?

Accepted Answer

Secured loans require collateral; unsecured loans do not

Answer

Secured personal loans require the borrower to pledge an asset as collateral, while unsecured loans are approved based solely on creditworthiness.

Question 2

Which credit score range is generally considered 'good' and may qualify a borrower for competitive personal loan rates in the US?

Accepted Answer

670–739

Answer

A FICO score of 670–739 is generally classified as 'good' and typically qualifies borrowers for competitive interest rates.

Question 3

What does APR stand for in the context of personal loans?

Accepted Answer

Annual Percentage Rate

Answer

APR stands for Annual Percentage Rate and represents the yearly cost of borrowing, including interest and fees.

Question 4

A personal loan origination fee is typically charged to cover which of the following?

Accepted Answer

The lender's cost of processing the loan

Answer

An origination fee is a one-time charge by the lender to process and fund the personal loan.

Question 5

When a borrower's debt-to-income (DTI) ratio is 45%, what does that indicate?

Accepted Answer

45% of gross monthly income goes toward debt payments

Answer

A DTI of 45% means 45% of the borrower's gross monthly income is used to pay existing debt obligations.

Loans Practice Test