Loans Cheat Sheet 2026

The 30 highest-yield Loans facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. What is a home equity loan's 'balloon payment'? → A large lump-sum payment due at the end of the loan term
2. What is the primary risk of refinancing federal student loans with a private lender? → The borrower loses access to federal protections like IDR plans and PSLF
3. A buyer with a 'subprime' credit score applying for an auto loan should expect: → Higher interest rates and stricter loan terms
4. When a borrower's debt-to-income (DTI) ratio is 45%, what does that indicate? → 45% of gross monthly income goes toward debt payments
5. What is a prepayment penalty on a personal loan? → A fee charged for paying off the loan early
6. What is the debt snowball repayment strategy? → Paying the smallest-balance loan first to build psychological momentum
7. A borrower takes a $400 payday loan with a $60 fee due in 14 days. What is the approximate APR? → 391%
8. A processor receives a purchase contract. Which element is most critical to verify first to ensure the transaction meets investor guidelines? → The sales price and any seller concessions, to confirm they are within allowable limits
9. What is 'private mortgage insurance' (PMI) and at what LTV threshold is it typically required on a conventional loan? → Insurance protecting the lender if the borrower defaults, required when LTV exceeds 80%
10. Forbearance on a student loan differs from deferment primarily because: → Interest always accrues on all loan types during forbearance, even subsidized loans
11. A 'hard inquiry' on a credit report occurs when: → A lender pulls credit for a formal loan application
12. What does a mortgage rate 'cap' limit? → How much the interest rate can increase per adjustment period or over the life of the loan
13. When refinancing an auto loan, what is the primary benefit a borrower typically seeks? → Obtaining a lower interest rate to reduce monthly payments or total cost
14. What is the primary difference between a secured personal loan and an unsecured personal loan? → Secured loans require collateral; unsecured loans do not
15. How much of your gross monthly income should you set aside for your mortgage and other debt obligations? → 45%
16. Being 'upside down' on an auto loan means: → The borrower owes more than the car is currently worth
17. Which factor most directly determines the interest rate a lender offers on a mortgage? → The borrower's credit score, LTV ratio, and current market rates
18. A VA home loan benefit is exclusively available to which group? → Eligible veterans, active-duty service members, and surviving spouses
19. What type of interest rate do most HELOCs carry? → Variable rate, typically tied to the prime rate
20. Which of the following is considered an alternative to payday loans for consumers needing emergency funds? → Payday Alternative Loans (PALs) offered by federal credit unions
21. Which federal agency has primary supervisory and regulatory authority over payday lenders? → The Consumer Financial Protection Bureau (CFPB)
22. Most US lenders cap the combined loan-to-value (CLTV) ratio for a HELOC or home equity loan at what maximum percentage? → 80–85%
23. What mortgage program guarantees that your interest rate and monthly mortgage payment won't change? → Fixed Rate
24. Which type of mortgage repayment structure has payments that increase at set intervals, designed for borrowers expecting income growth? → Graduated repayment mortgage
25. What is the purpose of a loan amortization schedule? → It lists each payment's breakdown of principal and interest over the loan term
26. What does it mean to refinance a loan? → Taking out a new loan to pay off an existing one, ideally at better terms
27. A borrower has a $500/month required payment but pays $700/month. How should the extra $200 be applied? → It should be applied to principal reduction
28. At what loan-to-value (LTV) ratio can a borrower typically request cancellation of PMI on a conventional loan? → 80%
29. Under the Military Lending Act (MLA), what is the maximum APR a lender can charge active-duty service members on payday loans? → 36%
30. In the early months of a 30-year fixed mortgage, most of your monthly payment goes toward: → Interest charges