Question

1. which of the following is not a form of credit?

a) a cell phone lease
b) a land - line telephone service
c) a payday loan
d) a cash advance

1. if a pawn shop borrower repays his loan before the due date, he will be able to redeem his

a) tax refund
b) pawned item
c) post - dated check
d) principal

1. which of the following is an advantage of a payday loan?

a) it offers options for small payments made over a period of time.
b) it does not require a credit check.
c) it offers a grace period for a loan repaid within 20 days.
d) it involves low fees.

1. which of the following is the least risky credit arrangement?

a) a payday loan
b) a tax rebate loan
c) a bank loan
d) a pawnshop loan

1. combining several small accounts into one larger account that can be financed at a lower rate is

a) debt consolidation
b) bankruptcy
c) credit limiting
d) overdraft protection

1. an individual who is unable to pay off his or her debts may need to declare ________ through

a) debt consolidation
b) bankruptcy
c) an overdraft
d) collateral

1. the option of debt consolidation works best when you have a(n)________.

a) greater cash outflow than inflow
b) asset you can pledge as collateral
c) personal reference
d) policy of carrying no balance on credit cards

1. though using a credit card as a type of financing is ______, it is also ______.

a) recommended; time - consuming
b) convenient; expensive
c) wise; costly
d) risky; uncommon

Explanation:

• Question 25: A land - line telephone service is typically paid for on a monthly basis without the element of borrowing or deferred payment that is characteristic of credit. A cell phone lease (often involves deferred payments), payday loan (borrowing money), and cash advance (borrowing against credit) are forms of credit.
• Question 26: In a pawn shop, when a borrower repays the loan, they get back the item they pawned. A tax refund is not related to pawn - shop redemption, a post - dated check is not what is redeemed, and the principal is the amount of the loan (not redeemed in the sense of getting an item back).
• Question 27: Payday loans are known for not requiring a credit check. They usually require full repayment (not small payments over time), have high fees (not low), and do not typically offer a grace period.
• Question 28: Bank loans are generally more regulated and have more formal underwriting processes compared to payday loans (high - risk, short - term, high - fee), tax rebate loans (often associated with predatory practices in some cases), and pawnshop loans (risk of losing the pawned item).
• Question 29: Debt consolidation is the process of combining multiple debts into one larger debt, often at a lower interest rate. Bankruptcy is the legal process of declaring insolvency, credit limiting is about restricting credit, and overdraft protection is for covering overdrawn bank accounts.
• Question 30: When an individual cannot pay off debts, bankruptcy is a legal option. Debt consolidation is for combining debts (not for insolvency), an overdraft is a bank - related over - spending, and collateral is an asset pledged for a loan (not a declaration for non - payment).
• Question 31: Debt consolidation often works better when there is an asset (like a house) that can be used as collateral to secure a lower - interest loan. Greater cash outflow than inflow is a bad situation for debt consolidation, a personal reference is not the key factor, and a policy of no credit - card balance is not relevant to debt consolidation.
• Question 32: Using a credit card for financing is convenient (easy to use for purchases) but can be expensive (due to high - interest rates if balances are carried). It is not always recommended (depending on usage), not time - consuming in the sense of financing (compared to other options), and it is common (not uncommon).

Answer:

1. B. a land - line telephone service
2. B. pawned item
3. B. It does not require a credit check
4. C. a bank loan
5. A. debt consolidation
6. B. bankruptcy
7. B. asset you can pledge as collateral
8. B. convenient; expensive