Banking Financial Awareness ยท Commerce Accountancy

Credit, Debt, and Finance

1,435 Questions

This topic covers essential concepts of credit, debt, and finance including bankruptcy, debt recovery, and financial acts. These questions are frequently asked in banking and IBPS exams. Test your knowledge of financial terminology and loan classifications.

Debt recovery actsBankruptcy filing proceduresFinancial classificationsMedium term financeCredit loss management

Credit, Debt, and Finance Questions

Multiple choice

Who has the right of repurchase?

  1. The debtor

  2. The debtor's spouse

  3. The debtor's children

  4. The debtor's parents
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The right of repurchase is held by the debtor.

Multiple choice

Can a debtor redeem or repurchase property that has been sold by a secured creditor if the debtor has filed for bankruptcy?

  1. Yes

  2. No
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A debtor can redeem or repurchase property that has been sold by a secured creditor even if the debtor has filed for bankruptcy.

Multiple choice

Which of the following is NOT a type of federal student loan?

  1. Direct Subsidized Loans

  2. Direct Unsubsidized Loans

  3. Direct PLUS Loans

  4. Perkins Loans
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Perkins Loans are no longer offered as a federal student loan program.

Multiple choice

When do students typically begin repaying their student loans?

  1. Immediately after graduation

  2. Six months after graduation

  3. One year after graduation

  4. Two years after graduation
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Most federal student loans have a six-month grace period after graduation before repayment begins.

Multiple choice

What is the standard repayment plan for federal student loans?

  1. 10 years

  2. 15 years

  3. 20 years

  4. 25 years
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The standard repayment plan for federal student loans is 10 years.

Multiple choice

What is the income-driven repayment plan for federal student loans?

  1. A repayment plan that bases monthly payments on a percentage of the borrower's discretionary income.

  2. A repayment plan that extends the repayment period to 20 or 25 years.

  3. A repayment plan that allows borrowers to make smaller payments while in school.

  4. A repayment plan that forgives the remaining balance of the loan after a certain number of years.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The income-driven repayment plan for federal student loans bases monthly payments on a percentage of the borrower's discretionary income.

Multiple choice

What are the drawbacks of student loan consolidation?

  1. Loss of certain loan benefits

  2. Potential increase in total interest paid

  3. Longer repayment period

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Student loan consolidation can have drawbacks such as the loss of certain loan benefits, a potential increase in total interest paid, and a longer repayment period.

Multiple choice

Who is eligible for student loan consolidation?

  1. Federal student loan borrowers

  2. Private student loan borrowers

  3. Both federal and private student loan borrowers

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Only federal student loan borrowers are eligible for student loan consolidation.

Multiple choice

In Islamic economics, the concept of 'riba' refers to:

  1. Interest on loans

  2. Excessive profit

  3. Hoarding of wealth

  4. Unethical business practices
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In Islamic law, 'riba' is prohibited, which has implications for financial transactions and banking practices.

Multiple choice

Which of the following is a type of mortgage where the interest rate remains fixed throughout the loan term?

  1. Adjustable-rate mortgage (ARM)

  2. Fixed-rate mortgage (FRM)

  3. Interest-only mortgage (IO)

  4. Balloon mortgage
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A fixed-rate mortgage (FRM) offers a constant interest rate for the entire duration of the loan. This means that the monthly payments remain the same throughout the loan term, providing stability and predictability in repayment.

Multiple choice

What is the term used to describe the initial payment made by a borrower towards the purchase of a property?

  1. Down payment

  2. Closing costs

  3. Escrow deposit

  4. Loan origination fee
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A down payment is the upfront payment made by a borrower when purchasing a property. It represents a percentage of the property's purchase price and is typically paid in cash or through other financial means.

Multiple choice

Which of the following is a type of mortgage that requires the borrower to make only interest payments during an initial period?

  1. Adjustable-rate mortgage (ARM)

  2. Fixed-rate mortgage (FRM)

  3. Interest-only mortgage (IO)

  4. Balloon mortgage
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

An interest-only mortgage (IO) allows the borrower to make payments that cover only the interest portion of the loan during an initial period, typically ranging from 5 to 10 years. After this period, the borrower starts making payments that include both interest and principal.

Multiple choice

What is the term used to describe the additional costs associated with obtaining a mortgage, such as appraisal fees, title insurance, and loan origination fees?

  1. Down payment

  2. Closing costs

  3. Escrow deposit

  4. Loan origination fee
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Closing costs are the fees and expenses incurred by both the buyer and seller during the finalization of a real estate transaction. These costs typically include appraisal fees, title insurance, loan origination fees, and other administrative charges.

Multiple choice

Which of the following is a type of mortgage that requires a large final payment at the end of the loan term?

  1. Adjustable-rate mortgage (ARM)

  2. Fixed-rate mortgage (FRM)

  3. Interest-only mortgage (IO)

  4. Balloon mortgage
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A balloon mortgage involves making regular payments during the loan term, but the remaining balance is due in a single lump sum payment at the end of the loan term. This type of mortgage is often used for short-term financing or when the borrower expects to have a large sum of money available at the end of the loan term.

Multiple choice

What is the term used to describe the process of obtaining a mortgage from a lender?

  1. Loan application

  2. Loan underwriting

  3. Loan closing

  4. Loan origination
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Loan origination refers to the process of initiating and processing a mortgage application. It involves gathering the necessary documentation, evaluating the borrower's creditworthiness, and determining the loan terms and conditions.