Loans Loan Repayment 3

Question 1

What is loan deferment?

Accepted Answer

A temporary postponement of loan payments, often without penalty

Answer

Deferment allows borrowers to temporarily pause payments, typically for reasons like school enrollment or unemployment, without defaulting.

Question 2

How does loan forbearance differ from deferment?

Accepted Answer

In forbearance, interest typically continues to accrue even on subsidized loans

Answer

Unlike deferment on subsidized loans where interest may be covered, forbearance generally results in interest accruing and capitalizing.

Question 3

What does it mean when a loan goes into default?

Accepted Answer

The borrower has failed to make payments for a specified period, triggering collection actions

Answer

Default occurs after a defined period of non-payment (e.g., 270 days for federal student loans) and triggers serious consequences including collections.

Question 4

Which federal student loan repayment plan caps monthly payments at a percentage of discretionary income?

Accepted Answer

Income-Driven Repayment (IDR) Plan

Answer

Income-Driven Repayment plans tie monthly payments to a percentage (typically 5-20%) of the borrower's discretionary income.

Question 5

If a borrower is delinquent on a mortgage, which option allows them to sell the home for less than what is owed and have the lender accept it as full settlement?

Accepted Answer

Short sale

Answer

A short sale lets the homeowner sell the property for less than the outstanding balance, with lender approval, to avoid foreclosure.

Loans Practice Test

Loans Practice Test

Loans Loan Repayment 3