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.

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Credit, Debt, and Finance Questions

Multiple choice

What is a "yielding back"?

  1. A yield of the floor that is made to return the speaking time to the presiding officer.

  2. A yield of the floor that is made to return the speaking time to the member who originally yielded it.

  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 yielding back is a yield of the floor that is made to return the speaking time to the presiding officer.

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.

Multiple choice

What is a mortgage assumption?

  1. The transfer of a mortgage loan from one borrower to another

  2. The prepayment of a mortgage loan

  3. The refinancing of a mortgage loan

  4. The modification of a mortgage loan
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A mortgage assumption is the transfer of a mortgage loan from one borrower to another. The new borrower assumes the responsibility for making the monthly payments on the loan.

Multiple choice

What is a mortgage subordination?

  1. The placement of a new mortgage loan ahead of an existing mortgage loan

  2. The placement of an existing mortgage loan ahead of a new mortgage loan

  3. The removal of a mortgage loan from a property

  4. The modification of a mortgage loan
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A mortgage subordination is the placement of a new mortgage loan ahead of an existing mortgage loan. This means that the new loan will have priority over the existing loan in terms of repayment.

Multiple choice

Which of the following is a common type of housing finance instrument?

  1. Mortgage

  2. Home equity loan

  3. Reverse mortgage

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

Mortgages, home equity loans, and reverse mortgages are common types of housing finance instruments used to finance the purchase or renovation of a home.

Multiple choice

What is the Bank of Canada's key policy interest rate called?

  1. The Overnight Rate

  2. The Bank Rate

  3. The Discount Rate

  4. The Prime Rate
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Bank of Canada's key policy interest rate is called The Overnight Rate.

Multiple choice

What is the Public Service Loan Forgiveness Program?

  1. A program that forgives the remaining balance of federal student loans after 10 years of public service.

  2. A program that forgives the remaining balance of federal student loans after 15 years of public service.

  3. A program that forgives the remaining balance of federal student loans after 20 years of public service.

  4. A program that forgives the remaining balance of federal student loans after 25 years of public service.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Public Service Loan Forgiveness Program is a program that forgives the remaining balance of federal student loans after 10 years of public service.