Types of Credit Exam Questions and Answers Fully Solved Latest Version 2025
Amortization - Answers The paying off of debt with a fixed repayment schedule in regular installments
over a period of time
collateral - Answers Something valuable that the lender can take as payment if you can't or don't repay
your secured loan
Direct Subsidized Loans - Answers A student loan that the federal government pays interest on as long
as the student is in school at least half-time
Direct Unsubsidized Loans - Answers A student loan where the student is responsible for the interest
during the time they are in school, which means they must pay that interest while studying or have it
rolled into their loan
Fixed Rate Loan - Answers A loan in which the interest rate is determined before loan is granted and
remains constant as long as ontime payments are being made
Home Equity - Answers The value of ownership built up in a home or property that represents the
current market value of the house minus any remaining mortgage payments
Home Equity Line Of Credit (HELOC) - Answers A line of credit extended to a homeowner that uses the
borrower's home as collateral
Installment Loan - Answers Loan used to finance a specific purchase for a specific amount of time, during
which regular payments pay the accrued interest and a portion of the principal
Interest - Answers The amount you owe as the cost of borrowing money
Lease - Answers A contract (often used for cars or property) by which one party gives property to
another for a specified time, usually in return for a periodic payment
Loan - Answers An agreement where you are credited with a fixed amount of money for a fixed period
of time, usually with interest
Mortgage - Answers A loan by individuals and businesses to make real estate purchases without paying
the entire value of the purchase up front
Peer-to-peer lending (P2PL) - Answers A method of debt financing that enables individuals to borrow
and lend money without the use of a financial institution as an intermediary
Principal - Answers Original amount of money borrowed, separate from interest or fees
Secured Debt - Answers Debt tied to a specific tangible asset that can be used as collateral and
repossessed if payments are not made
Term - Answers The amount of time you have to repay your entire loan
Amortization - Answers The paying off of debt with a fixed repayment schedule in regular installments
over a period of time
collateral - Answers Something valuable that the lender can take as payment if you can't or don't repay
your secured loan
Direct Subsidized Loans - Answers A student loan that the federal government pays interest on as long
as the student is in school at least half-time
Direct Unsubsidized Loans - Answers A student loan where the student is responsible for the interest
during the time they are in school, which means they must pay that interest while studying or have it
rolled into their loan
Fixed Rate Loan - Answers A loan in which the interest rate is determined before loan is granted and
remains constant as long as ontime payments are being made
Home Equity - Answers The value of ownership built up in a home or property that represents the
current market value of the house minus any remaining mortgage payments
Home Equity Line Of Credit (HELOC) - Answers A line of credit extended to a homeowner that uses the
borrower's home as collateral
Installment Loan - Answers Loan used to finance a specific purchase for a specific amount of time, during
which regular payments pay the accrued interest and a portion of the principal
Interest - Answers The amount you owe as the cost of borrowing money
Lease - Answers A contract (often used for cars or property) by which one party gives property to
another for a specified time, usually in return for a periodic payment
Loan - Answers An agreement where you are credited with a fixed amount of money for a fixed period
of time, usually with interest
Mortgage - Answers A loan by individuals and businesses to make real estate purchases without paying
the entire value of the purchase up front
Peer-to-peer lending (P2PL) - Answers A method of debt financing that enables individuals to borrow
and lend money without the use of a financial institution as an intermediary
Principal - Answers Original amount of money borrowed, separate from interest or fees
Secured Debt - Answers Debt tied to a specific tangible asset that can be used as collateral and
repossessed if payments are not made
Term - Answers The amount of time you have to repay your entire loan
