Match the following:
Unsecured Debt an open line of credit that can be used for any
purchases as long as you’re under the credit limit.
Payment amounts vary each pay period based on the
size of the debt.
Variable-Rate used to finance a specific purchase for a specific
amount of time. Regular payments are made to pay
the interest and the principal.
Installment Loans debt is tied to a specific asset that can be used as
collateral and repossessed if borrower doesn’t make
payments
Secured Debt interest rate remains constant during the duration of
the loan
Fixed-Rate debt is not tied to a specific asset; there is no collateral
that can be repossessed if borrower defaults
Revolving Credit interest rate can change during the duration of the
loan based on the prime rate or an index rate
Question: What is a debt management plan?
Question: What are the roles of the creditor and the client in a debt management
plan?
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Match the following:
Credit Card Accountability, a federal law that requires
Responsibility and Disclosure creditors to mail out bills at
Act (CARD) least 14 days before payment
is due and also establishes
procedures for resolving
billing errors on credit
accounts
Fair Debt Collection Practices a federal law that bars
Act collection agencies from using
threats, harassment, or abuse
in their efforts to collect debts
Equal Credit Opportunity Act an act of Congress that makes
it unlawful for a credit grantor
to discriminate on the basis of
race, color, religion, national
origin, sex, marital status, or
age (provided the applicant is
legally able to enter into
contract)
Fair Credit Reporting Act an act of Congress that
establishes responsibilities of
card issuers and protections
for cardholders regarding
interest rates, grace periods,
pay-off times and other
information
Fair Credit Billing Act a federal law governing the
activities of credit bureaus
and creditors. It requires
creditors to furnish accurate
and complete information to
borrowers; it also establishes
a process consumers may use
to correct inaccuracies in
credit reports
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1. Installment 2. Secured vs 3. Variable vs
TYPE OF Loans vs Unsecured Debt Fixed Rate
Revolving Credit S = secured V = variable
CREDIT I = installment U = unsecured F = fixed
R = revolving CBE = could be either CBE = could be
CBE = could be either
either
Auto loan
Credit card
Mortgage
Payday loan
Personal loan (from
bank)
Small business loan
(from bank)
Student loan (Federal)
Question: Explain how APR is different than interest (Short answer)
Question: Define credit score (Short answer)
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MCQ
1. What is a finance charge?
A. The total amount of a loan
B. The interest rate only
C. The dollar amount paid to borrow, including interest and other charges
D. The loan amount plus taxes
2. If you borrow $500 and pay back $550, what is the finance charge?
A. $50 B. $500 C. $550 D. $1050
3. What is the purpose of the Truth in Lending Act (TILA)?
A. To allow lenders to charge any interest rate
B. To require borrowers to pay extra fees
C. To ensure borrowers understand the true cost of borrowing
D. To give tax benefits on loans
4. Which law requires lenders to disclose standardized loan information?
A. Fair Credit Reporting Act B. Truth in Lending Act
C. Equal Opportunity Act D. Consumer Safety Act
5. What is the primary purpose of a credit score?
A. To determine your annual income
B. To set your credit card limit
C. To measure your financial risk when applying for loans
D. To calculate your taxes
6. Which company created the most widely used credit score model in North America?
A. TransUnion B. Experian
C. Equifax D. Fair Isaac Corporation
7. What is the range of most credit scores based on the FICO model?
A. 100 to 900 B. 200 to 750
C. 300 to 850 D. 350 to 950
8. A FICO score of 750 would be considered:
A. Very Good B. Fair
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C. Poor D. Exceptional
9. Which of the following credit bureaus does NOT exist?
A. Equifax B. Experian
C. CreditWise D. TransUnion
10. Which of the following contributes the most to your FICO credit score?
A. New Credit B. Payment History
C. Mix of Credit D. Length of Credit
11. What percentage of your credit score is based on “Capacity” (credit usage)?
A. 15% B. 25%
C. 30% D. 35%
12. Opening several new credit accounts in a short time can:
A. Hurt your credit score B. Have no effect
C. Improve your score instantly D. Make your payment history disappear
13. How often can you request a free credit report from each of the three major credit bureaus?
A. Once every six months B. Once every two years
C. Once a month D. Once every year
14. What is an example of “Mix of Credit” used in credit score calculation?
A. Having multiple credit cards only
B. Using a debit card
C. Keeping a high balance on one card
D. Having both credit cards and installment loans
15. What is the main role of a credit counselor?
A. To help manage debt and create personalized financial plans
B. To invest in your credit score
C. To loan you money
D. To report your credit activity to the IRS
16. Which of the following is NOT a service typically provided by a credit counselor?
A. Creating a budget B. Debt management plans
C. Stock trading advice D. Financial education
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17. Who can benefit from credit counseling?
A. Only people with student loans
B. Anyone trying to earn more income
C. Only those with excellent credit
D. People facing credit card debt, foreclosure, or financial setbacks
18. What is a common feature of a debt management plan?
A. You stop making payments to creditors
B. Creditors raise your interest rates
C. You make timely payments while creditors may lower your rates
D. You are required to take out another loan
19. In a debt management plan, what is typically expected from the individual?
A. Make consistent, on-time payments B. Stop using credit cards completely
C. Ignore all creditor communication D. Pay all debts off in one lump sum
20. In a debt management plan, what might creditors agree to do?
A. Forgive all debts
B. Increase payment amounts
C. Lower interest rates and simplify payment terms
D. Close the individual’s accounts permanently
21. How much do non-profit credit counseling services usually cost?
A. $100 per session B. Little or no fees
C. Thousands of dollars D. A fixed 10% of your debt
22. Which of the following is a red flag when choosing a credit counselor?
A. Certified and experienced staff B. Promises to “erase” your debt overnight
C. Clear and upfront pricing D. Offers customized budgeting help
23. Which of the following is a valid reason to file for bankruptcy?
A. You want to cancel all your bills
B. You’ve already tried to negotiate, but creditors won’t work with you
C. You are planning to apply for a new credit card
D. You have a high credit score
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24. Chapter 7 bankruptcy is also known as:
A. Debt reorganization B. Business restructuring
C. Liquidation D. Debt settlement
25. How long does Chapter 7 bankruptcy stay on your credit report?
A. 3 years B. 5 years
C. 7 years D. 10 years
26. What happens under Chapter 13 bankruptcy?
A. Your assets are sold to repay creditors
B. You are forgiven all debts without repayment
C. You repay creditors over 3–5 years and keep your assets
D. The court assigns you a financial counselor
27. What is Chapter 11 bankruptcy primarily used for?
A. Individual consumers B. Student loan forgiveness
C. Business reorganization D. Credit score repair
Fill in the Blanks
1. One reason to file for bankruptcy is when your _________________ far exceed your income and
assets.
2. In Chapter 7 bankruptcy, a ___________________ is appointed to sell your non-exempt assets and
pay creditors.
3. Chapter 13 bankruptcy allows you to keep assets as long as you follow a ____ to ____ year
repayment plan.
4. Two examples of exempt property include ________________ and ________________.
5. Before filing for bankruptcy, it is recommended to try __________________ with your creditors.
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Sources of Credit:
1. Banks and credit unions
2. Finance company (offer loans, but not deposits)
3. Credit card company
4. Mortgage brokers or lenders
5. Auto-finance company
6. Retailers (example: furniture store)
7. Payday lenders (NOTE-CAUTION)
8. Pawnshops (NOTE-BE AWARE)
9. Tax preparers via tax-refund loans
10. Government agencies
11. Family or friends
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Explain how APR is different than interest (Short answer)
APR is the total cost of borrowing, including interest and fees,
expressed as a percentage, while a loan’s interest rate only shows
the cost of borrowing the money itself.
Define credit score (Short answer)
A credit score is a number used by financial institutions and credit
card companies to determine risk level when issuing you a loan or a
credit card.
What is a debt management plan?
A debt management plan is an agreement between you and the
credit counseling service to pay off your credit cards.
What are the roles of the creditor and the client in a debt
management plan?
The client agrees to make regular, on-time payments, while the
creditor may lower interest rates and combine payments to make
them easier to manage.
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Finance charge: Dollar amount paid to borrow, including interest, fees and
any other charges. Example: If you borrow $100 and pay back $105, the $5
difference is the finance charge
Types of fees:
annual fees origination fees
balance transfer fees maintenance fees
transaction fees late fees AND others
Truth in Lending Act (TILA): Federal law that requires lenders to disclose
standardized information about the terms and costs of consumer credit,
ensuring borrowers understand the true cost of borrowing.
1. In your own words, summarize what a credit counselor does
and how they could help you if you were in debt.
They help people take control of their finances, manage debt, and
create personalized plans. They may help you budget, set up debt
management plans, and provide financial education.
2. Who is credit counseling for?
It’s for anyone struggling with credit card debt, managing finances,
paying student loans, foreclosure, or recovering from financial
setbacks.
3. With a debt management plan, what is often expected of the
individual and the creditors?
Individuals need to make timely payments, and creditors usually agree
to lower interest rates and simplify payments.
4. How much does credit counseling cost?
Non-profit counselors often charge little or no fees.
5. Name 3 or 4 things to keep in mind when choosing a credit
counselor.
Ensure the counselor is certified, has a good reputation, offers
personalized services, and provides transparent fees.
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MCQ Answers
1. C 10. B 19. A
2. B 11. C 20. C
3. C 12. A 21. B
4. B 13. D 22. C
5. C 14. D 23. B
6. D 15. A 24. C
7. C 16. C 25. D
8. A 17. D 26. C
9. C 18. C 27. C
Fill in the blanks
1: liabilities
2: trustee
3: 3 to 5
4: home equity, retirement accounts (also accepted: personal items, clothing, tools for work)
5: negotiating
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