Banking Financial Awareness ยท Commerce Accountancy

Credit, Debt, and Finance

1,382 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

What is a timeshare exchange?

  1. The exchange of a timeshare for a stay at another resort.

  2. The exchange of a timeshare for a cash payment.

  3. The exchange of a timeshare for a vacation rental.

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

A timeshare exchange is the exchange of a timeshare for a stay at another resort.

Multiple choice

What is the average student loan debt in the United States?

  1. $30,000
  2. $40,000
  3. $50,000
  4. $60,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The average student loan debt in the United States is $30,000.

Multiple choice

What is a mortgage?

  1. A loan used to purchase a home.

  2. A loan used to purchase a car.

  3. A loan used to start a business.

  4. A loan used to pay for college.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A mortgage is a loan used to purchase a home. The loan is secured by the home itself, which means that the lender can foreclose on the home if the borrower defaults on the loan.

Multiple choice

What is a credit card?

  1. A type of loan that allows you to borrow money up to a certain limit.

  2. A type of payment card that allows you to make purchases without using cash.

  3. A type of savings account that pays interest on your deposits.

  4. A type of investment account that allows you to buy and sell stocks, bonds, and other financial assets.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A credit card is a type of payment card that allows you to make purchases without using cash. You can use a credit card to purchase goods and services at stores, online, and over the phone.

Multiple choice

What is a bond?

  1. A share of ownership in a company.

  2. A loan of money to a company.

  3. A deposit of money in a bank or credit union.

  4. A purchase of goods or services for personal use.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A bond is a loan of money to a company. When you buy a bond, you are essentially lending money to the company. In return, the company agrees to pay you interest on the loan and to repay the principal amount of the loan when it matures.

Multiple choice

What is a "courtesy yield"?

  1. A yield of the floor that is made out of politeness or respect.

  2. A yield of the floor that is made in exchange for a favor.

  3. A yield of the floor that is made to allow a member to make a brief statement.

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

A courtesy yield is a yield of the floor that is made out of politeness or respect, typically to allow a member to make a brief statement or to ask a question.

Multiple choice

When is TDS deducted?

  1. At the time of payment

  2. At the time of credit

  3. At the time of both payment and credit

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

TDS is deducted at the time of payment.

Multiple choice

Which of the following is NOT a type of mortgage loan?

  1. Fixed-rate mortgage

  2. Adjustable-rate mortgage

  3. Interest-only mortgage

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

A reverse mortgage is a loan that allows homeowners aged 62 or older to borrow against the equity in their home without having to make monthly payments. The loan is repaid when the homeowner sells the home or passes away.

Multiple choice

What is the maximum loan-to-value (LTV) ratio for a conventional mortgage?

  1. 80%

  2. 90%

  3. 95%

  4. 100%
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The maximum LTV ratio for a conventional mortgage is typically 80%, meaning that the borrower must make a down payment of at least 20% of the purchase price.

Multiple choice

Which of the following is NOT a type of government-backed mortgage loan?

  1. FHA loan

  2. VA loan

  3. USDA loan

  4. Jumbo loan
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A jumbo loan is a mortgage loan that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac. Jumbo loans are not government-backed and typically have higher interest rates than conventional or government-backed loans.

Multiple choice

What is a balloon mortgage?

  1. A mortgage loan with a large final payment

  2. A mortgage loan with a short repayment period

  3. A mortgage loan with a variable interest rate

  4. A mortgage loan that is secured by two properties
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A balloon mortgage is a mortgage loan that has a large final payment, typically due at the end of the loan term. The monthly payments on a balloon mortgage are typically lower than the payments on a traditional mortgage, but the final payment can be a significant financial burden.

Multiple choice

What is a mortgage pre-approval?

  1. A conditional approval for a mortgage loan

  2. A final approval for a mortgage loan

  3. A credit check for a mortgage loan

  4. An appraisal for a mortgage loan
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A mortgage pre-approval is a conditional approval for a mortgage loan that is based on the borrower's financial information. A pre-approval gives the borrower an idea of how much they can borrow and can help them make a stronger offer on a property.

Multiple choice

What is the purpose of a home equity line of credit (HELOC)?

  1. To allow homeowners to borrow against the equity in their home

  2. To pay off the mortgage loan balance

  3. To generate interest for the borrower

  4. To cover maintenance and repair costs
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A HELOC is a revolving line of credit that allows homeowners to borrow against the equity in their home. The borrower can use the funds from a HELOC for any purpose, such as home improvements, education, or debt consolidation.

Multiple choice

What is a mortgage payoff statement?

  1. A statement that shows the remaining balance on a mortgage loan

  2. A statement that shows the monthly payments on a mortgage loan

  3. A statement that shows the interest rate on a mortgage loan

  4. A statement that shows the loan term of a mortgage loan
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A mortgage payoff statement shows the remaining balance on a mortgage loan, as well as the amount of interest that is owed. The statement also includes the date when the loan will be paid off if the borrower continues to make the regular monthly payments.

Multiple choice

What is a mortgage recast?

  1. A change in the loan term of a mortgage

  2. A change in the interest rate of a mortgage

  3. A change in the monthly payment of a mortgage

  4. A change in the loan balance of a mortgage
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A mortgage recast is a change in the monthly payment of a mortgage, typically done to lower the payment amount. A recast may be done if the borrower has made extra payments on the loan or if the interest rate has decreased.