| Coverage : Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. This quiz tests the quiz takers knowledge about debt consolidation. |
| 1. | Assets owed are called |
| a. | | credits |
| b. | | debts |
| c. | | lease |
| d. | | donation |
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| 2. | What is debt? |
| a. | | Something owed to somebody |
| b. | | Something given to someone for free |
| c. | | Something hired from some one for free |
| d. | | Something received from some one |
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| 3. | Some companies may use debt as a part of their overall corporate finance strategy. |
| a. | | true |
| b. | | false |
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| 4. | Debt consolidation means |
| a. | | taking out many loans to pay off many others |
| b. | | taking out one loan to pay off many others |
| c. | | taking many loans to pay off one loan |
| d. | | giving out loans to others |
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| 5. | Debt consolidation is done |
| a. | | to secure a lower interest rate |
| b. | | to secure a fixed interest rate |
| c. | | for the convenience of servicing only one loan |
| d. | | any of the above |
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| 6. | In debt consolidation: |
| a. | | the risk to the lender is increased so the interest rate offered is lower |
| b. | | the risk to the lender is reduced so the interest rate offered is higher |
| c. | | the risk to the lender is reduced so the interest rate offered is lower |
| d. | | the risk to the bank is increased so the interest rate offered is lower |
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| 7. | What does the collateralization of the loan allow? |
| a. | | a higher interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan |
| b. | | a lower interest rate than without it, because by collateralizing, the asset owner disagrees to allow the forced sale (foreclosure) of the asset to pay back the loan |
| c. | | a lower interest rate than with it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan |
| d. | | a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan |
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| 8. | Debt consolidation companies can discount the amount of the loan |
| a. | | true |
| b. | | false |
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| 9. | Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so |
| a. | | the decision to consolidate must not be weighed carefully |
| b. | | the decision to consolidate must be weighed carefully |
| c. | | the decision to consolidate must be weighed blindly |
| d. | | the decision to consolidate must be some times weighed carefully |
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| 10. | What theoretical advantage does debt consolidation offer? |
| a. | | turns low interest rates into high interest ones |
| b. | | turns high interest debt in to even higher ones |
| c. | | turns high interest debt balances in to low interest ones |
| d. | | all of the above |
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