Difficulty: Mixed
Why should borrowers read a Key Facts Statement?
A Skip the loan agreement
B Review key loan terms
C Replace identity documents
D Avoid repayment altogether
Answer: B. Review key loan terms A KFS presents important loan facts in a standard, easier-to-understand format to support an informed decision.
Which annual cost does APR summarize?
A Annual borrowing cost
B Only the monthly instalment
C Only the loan principal
D The borrower’s credit score
Answer: A. Annual borrowing cost The RBI defines APR as annual credit cost including interest and associated charges.
Which components are included in an EPI?
A Only the processing fee
B Only the principal
C Insurance and taxes only
D Principal and interest
Answer: D. Principal and interest An equated periodic instalment includes principal and interest components.
In a loan, what does principal refer to?
A Annual percentage rate
B Processing time
C Amount borrowed
D Repayment frequency
Answer: C. Amount borrowed Principal is the amount borrowed, before considering interest and fees.
How is loan interest different from principal?
A Amount originally borrowed
B Cost of borrowing
C Loan approval document
D Repayment end date
Answer: B. Cost of borrowing Interest is the cost charged for borrowing money, as stated by the lender.
Which period does loan tenure describe?
A Repayment period
B Borrower’s credit history
C Loan processing charge
D Collateral market value
Answer: A. Repayment period Tenure describes the duration over which repayments are scheduled.
How is EMI typically used in lending?
A One-time application charge
B Collateral valuation report
C Credit score category
D Monthly repayment instalment
Answer: D. Monthly repayment instalment EMI means equated monthly instalment, a scheduled payment made monthly under the loan terms.
Across a repayment schedule, what does amortization track?
A Change in credit score
B Value of pledged property
C Repayment of loan balance
D Application review stages
Answer: C. Repayment of loan balance An amortization schedule shows how scheduled payments repay principal and interest over time.
Which feature generally secures a loan?
A A higher credit score
B Pledged collateral
C A longer application form
D A payment reminder
Answer: B. Pledged collateral A secured loan is backed by an asset or other security under its terms.
How does an unsecured loan differ?
A No pledged collateral
B No repayment obligation
C No interest charges
D No written agreement
Answer: A. No pledged collateral Unsecured borrowing generally does not require a specific asset as collateral.
What role does collateral serve?
A Sets the borrower’s salary
B Cancels every interest charge
C Replaces the repayment schedule
D Provides loan security
Answer: D. Provides loan security Collateral provides security for a loan, subject to the contract and applicable law.
For a fixed-rate offer, what should the borrower confirm?
A The lender’s office hours
B The loan’s display color
C Rate period and reset terms
D The payment app version
Answer: C. Rate period and reset terms A borrower should confirm how long the rate is fixed and whether contract terms allow a reset.
What can happen to a floating interest rate?
A It removes all fees
B It may change
C It cancels principal
D It never changes
Answer: B. It may change A floating rate can move according to the applicable benchmark and loan terms.
Why does a benchmark reset clause matter?
A It may change the rate
B It changes the borrower’s PAN
C It removes collateral
D It sets the credit score
Answer: A. It may change the rate A reset clause explains when a floating rate may be revised.
When comparing loans, which cost measure helps?
A Office location
B Application page count
C Customer service hours
D APR
Answer: D. APR APR helps compare annual borrowing costs because it includes interest and associated charges.
Which processing fees should a borrower review?
A The lender’s logo
B The branch wall color
C Disclosed charges
D The loan’s advertisement music
Answer: C. Disclosed charges RBI fair-practices guidance emphasizes transparent disclosure of fees and charges.
Where should prepayment terms be reviewed?
A Social media profile
B Loan documents
C Utility bills
D Employer directory
Answer: B. Loan documents Borrowers should review the contract and disclosed terms for any applicable prepayment conditions or charges.
How is a loan sanction best described?
A Lender’s approval decision
B The final repayment receipt
C A monthly bank statement
D A credit bureau report
Answer: A. Lender’s approval decision Sanction is the lender’s decision to approve a loan subject to stated terms and conditions.
When does loan disbursal occur?
A The application is started
B The credit score is erased
C The loan is fully repaid
D Funds are released
Answer: D. Funds are released Disbursal is the release of approved loan funds under the agreed process.
Before accepting a sanction, which details merit review?
A Only the lender’s logo
B The app background color
C Amount and key terms
D The branch’s opening date
Answer: C. Amount and key terms The borrower should review the sanctioned amount, rate, charges, repayment schedule, and conditions.
How does a repayment schedule help?
A Removes the loan balance
B Shows payment timing and amounts
C Approves future applications
D Guarantees a rate reduction
Answer: B. Shows payment timing and amounts A repayment schedule sets out when payments are due and their amounts.
How does a loan agreement function?
A Contract setting loan terms
B A credit score summary
C A tax return form
D A salary certificate
Answer: A. Contract setting loan terms The agreement records the terms and obligations agreed between the lender and borrower.
Which detail should appear in clear loan disclosures?
A The borrower’s social media name
B The lender’s office decor
C The phone’s operating system
D Fees and repayment conditions
Answer: D. Fees and repayment conditions Clear disclosures let a borrower understand costs and conditions before accepting a loan.
Why is a loan different from a grant?
A It has no written terms
B It is always interest-free
C It must be repaid
D It has no due date
Answer: C. It must be repaid A loan creates a repayment obligation under its terms; a grant generally does not.
How can a down payment affect a purchase loan?
A It removes all loan interest
B It can reduce borrowed amount
C It raises the loan principal
D It guarantees approval
Answer: B. It can reduce borrowed amount A larger down payment can reduce the portion of a purchase funded through borrowing.
With other terms unchanged, what can a longer tenure do?
A Lower periodic instalment
B Erase the principal
C Guarantee lower total interest
D Remove the loan agreement
Answer: A. Lower periodic instalment Spreading repayment over more periods can lower each instalment, while total interest may rise.
With other terms unchanged, what can a higher rate do?
A Cancel the repayment schedule
B Reduce the borrowed principal
C Guarantee faster approval
D Increase borrowing cost
Answer: D. Increase borrowing cost A higher rate generally increases borrowing cost when other loan terms stay unchanged.
How should a borrower assess an affordable EMI?
A Compare it with app ratings
B Compare it with branch size
C Compare it with budget
D Compare it with market slogans
Answer: C. Compare it with budget The payment should fit a realistic budget after essential expenses and other debt obligations.
Before borrowing, what amount should be considered?
A The maximum advertised amount
B Actual funding need
C A friend’s loan balance
D The lender’s annual revenue
Answer: B. Actual funding need Borrowing only what is needed can limit debt and associated costs.
When is a loan offer ready for comparison?
A After reviewing all charges
B After seeing a banner
C After hearing a slogan
D After selecting an emoji
Answer: A. After reviewing all charges Reviewing charges and repayment terms makes comparisons more meaningful.
When an instalment is late, what charge may apply?
A Automatic loan cancellation
B Guaranteed credit increase
C Instant principal forgiveness
D Applicable late charges
Answer: D. Applicable late charges Late-payment consequences depend on the disclosed contract terms and applicable rules.
Which responsibility does a co-borrower generally share?
A Sets the benchmark rate
B Issues the KFS
C Shares repayment responsibility
D Cancels the agreement
Answer: C. Shares repayment responsibility A co-borrower shares contractual responsibilities; exact obligations depend on the loan agreement.
Which support does a guarantor agree to provide?
A Set the interest benchmark
B Provide agreed repayment support
C Approve the loan application
D Create the repayment schedule
Answer: B. Provide agreed repayment support A guarantor accepts obligations defined by the guarantee and loan documents.
Before an EMI, which details should be checked?
A Payment date and method
B The lender’s brand color
C The branch’s wall clock
D The app’s icon shape
Answer: A. Payment date and method Knowing the due date and payment method helps avoid missed instalments.
Why keep payment receipts or statements?
A Change the interest rate
B Remove the loan contract
C Increase the sanctioned amount
D Track repayments made
Answer: D. Track repayments made Payment records help borrowers confirm credited repayments and resolve discrepancies.
How does an outstanding balance statement help?
A A guaranteed future approval
B The lender’s annual profit
C Remaining loan balance
D Every borrower’s credit score
Answer: C. Remaining loan balance An account statement helps the borrower review payments and the remaining balance.
If a loan charge seems unfamiliar, what is a sensible step?
A Ignore every statement
B Ask the lender for details
C Stop all payments immediately
D Delete the loan account
Answer: B. Ask the lender for details The borrower can request an explanation and compare the charge with disclosed terms.
Why keep a signed loan agreement?
A Confirm accepted terms
B Replace all payment records
C Set the credit score
D Avoid every loan charge
Answer: A. Confirm accepted terms The signed agreement is a record of the terms accepted by the parties.
Why was a Key Facts Statement introduced?
A Automatic loan approval
B Guaranteed rate reductions
C Credit score removal
D Informed borrower decisions
Answer: D. Informed borrower decisions RBI’s KFS framework is intended to help prospective borrowers understand key loan facts.
When should key loan costs be reviewed?
A Only after final payment
B Only after a missed EMI
C Before accepting the offer
D Only after closing an account
Answer: C. Before accepting the offer Reviewing costs before agreeing supports informed borrowing decisions.
When does an interest reset date matter?
A Collateral ownership transfer
B Rate revision timing
C Credit score expiry
D Loan application numbering
Answer: B. Rate revision timing The reset date indicates when a floating-rate loan may be reviewed under its terms.
Which part of repayment might a moratorium change?
A Payment timing
B The original loan purpose
C The borrower’s identity
D The lender’s legal status
Answer: A. Payment timing A moratorium may defer payments, but interest treatment depends on the contract and applicable rules.
Why should moratorium terms be read carefully?
A Principal always disappears
B The loan becomes a grant
C Every fee is automatically waived
D Interest may still accrue
Answer: D. Interest may still accrue Deferral of payments does not automatically mean interest or other obligations stop.
Which document can explain scheduled loan payments?
A Credit card advertisement
B Property listing
C Repayment schedule
D Tax refund message
Answer: C. Repayment schedule The repayment schedule describes the expected payment dates and amounts.
How should credit score be viewed in loan decisions?
A A guaranteed approval
B One factor among several
C A substitute for income
D A fixed interest rate
Answer: B. One factor among several Lenders may consider credit information along with other factors; a score alone does not guarantee approval.
How does initial eligibility differ from sanction?
A Eligibility is not approval
B They always mean repayment
C They are bank fees
D They are loan durations
Answer: A. Eligibility is not approval Meeting preliminary eligibility criteria does not itself mean the lender has sanctioned a loan.
If a borrower defaults, what may a secured lender do?
A Erase all payment records
B Ignore the contract
C Raise the borrower’s income
D Enforce agreed security
Answer: D. Enforce agreed security Consequences of default depend on the security documents and applicable law.
Why review how an EMI is calculated?
A Change the borrower’s identity
B Remove the repayment term
C Understand principal and interest
D Guarantee a refund
Answer: C. Understand principal and interest An instalment includes repayment components; the schedule clarifies how payments are allocated.
Which borrowing habit supports repayment capacity?
A Accept every offer quickly
B Borrow within repayment capacity
C Ignore disclosed charges
D Borrow the largest amount
Answer: B. Borrow within repayment capacity A realistic borrowing decision considers the ability to repay alongside other commitments.
After a loan is repaid, what record is useful?
A Closure confirmation
B An unused application form
C A new credit card
D A blank payment schedule
Answer: A. Closure confirmation Written confirmation of closure helps document that the account was settled.