Borrowing and credit quiz

Borrowing & credit iconTake this quiz to see how much you know about borrowing money. Test your knowledge.

There are ten questions. Select an answer to receive feedback. Your score is calculated at the end. 

Clock Estimated time: 5 mins

eftpos machineSam has $3,000 owing on his credit card at 16.5% interest. If he pays only the 'minimum payment due' each month as shown on the card statement, how long will it take him to pay off the whole amount?

  • About 31 years
  • About 4 years

Correct. If Sam only pays the minimum amount each month, the balance he owes will reduce very slowly and he will pay nearly $5,000 in interest.

Use our credit card calculator to see how long it will take you to pay off your credit card debt if you only make the minimum repayments each month.

Incorrect. If Sam only pays the minimum amount each month, he will be paying off his credit card debt for 21 years and will pay nearly $5,000 in interest.

Use our credit card calculator to see how long it will take you to pay off your credit card debt if you only make the minimum repayments each month.

house on calculatorYou see a home loan advertised at 5.5% per annum. Next to that figure you see a 'comparison rate' quoted at 5.85%. What does 'comparison rate' mean?

  • The average rate charged for similar loans currently being offered
  • The real of interest rate when most fees and charges are taken into account

Correct. The comparison rate is the interest rate plus most fees and charges you must pay on the loan. Credit providers must provide a comparison rate for advertised loans and credit products. It gives you a better idea of how much the loan will really cost you and allows you to compare products from different lenders.

See interest rates for more information.

Incorrect. The comparison rate includes interest plus most fees and charges on the loan being advertised. Credit providers must provide a comparison rate for advertised loans and credit products. It gives you a better idea of how much the loan will really cost you and allows you to compare products from different lenders.

See interest rates for more information.

document stackIf you halve your monthly mortgage repayments and make them fortnightly instead of monthly, will you pay less interest?

  • Yes
  • No

That's correct. By making fortnightly repayments, at half the monthly repayment amount, you will make the equivalent of 13 monthly repayments instead of 12 over the year. This will not only reduce your interest cost but will mean your loan is paid off sooner.

See making repayments for more information.

Actually, it's true. By making fortnightly repayments, at half the monthly repayment amount, you will make the equivalent of 13 monthly repayments instead of 12 over the year. This will not only reduce your interest cost but will mean your loan is paid off sooner.

See making repayments for more information.

hearts and bandaidA year ago Jane guaranteed a car loan for her ex-partner, who was a full-time student at the time. She is now receiving calls from a debt collector who is chasing the unpaid debt. How much of the remaining debt could Jane be liable for?.

  • Jane and her ex-partner are liable for half the debt each
  • Jane could be responsible for the entire amount outstanding

That's correct. By guaranteeing the loan, Jane can now be held liable for the outstanding balance of the debt if her ex-partner has defaulted on the loan repayments. 

Read loans involving family and friends  for more information.

Incorrect. Because Jane has guaranteed the loan, she could be held liable for the outstanding balance of the debt if her ex-partner has defaulted on the loan repayments.

Read loans involving family and friends  for more information.

laptopTed wants to buy a laptop but doesn't have enough cash to buy it outright. He finds a store offering rent to buy deals on the laptop he's interested in. If Ted takes this deal, will he get to keep the laptop at the end of the rental period?

  • Yes
  • No

That's correct. With rent-to-buy deals you don't automatically own the item at the end of the rental period. Usually you will be given the option to buy the item, for a nominal amount, however the rental contract is likely to state that it's not an automatic right.

Read rent to buy for more information.

That's incorrect. With rent-to-buy deals you don't automatically own the item at the end of the rental period. Usually you will be given the option to buy the item, for a nominal amount, however the rental contract is likely to state that it's not an automatic right.

Read rent to buy for more information.

book stackGeorgia is 28 and recently applied for a personal loan from a bank to pay for some extra study. The bank refused the loan because Georgia had a bad credit listing on her credit file. The listing was from 3 years ago when she was overseas for a few months and forgot to pay her credit card bill. Can the bank refuse her loan?

  • Yes
  • No

Correct. Banks have the right to decide who they lend money to and they will look at your credit file when deciding whether or not to lend you money. Bad debts remain on your credit file for 5 to 7 years and will affect your credit score.

See credit reports for more information.

That's incorrect. Banks have the right to decide who they lend money to and they will look at your credit file when deciding whether or not to lend you money. Bad debts remain on your credit file for 5 to 7 years and will affect your credit score.

See credit reports for more information.

car on calculatorKevin has just found his perfect car but needs a loan to pay for it. The car yard offers him finance, telling him he won't get a better deal elsewhere. Should Kevin sign up for the loan?

  • Yes, car yard finance is normally cheaper than a loan from other lenders
  • No, he should see what's available from other lenders first

That's incorrect. Car yard finance is not necessarily cheaper than loans from banks and other lenders and sometimes the cheap finance deals offered only apply to specific models or under certain conditions. Kevin should shop around and compare loans from several lenders before agreeing to anything. He could also get pre-approval for a loan before he goes car shopping.

See car loans for more information.

That's right! Car yard finance is not necessarily cheaper than other loans and sometimes the cheap finance deals offered only apply to specific models or under certain conditions. Kevin should shop around and compare loans from several lenders before agreeing to anything. He could also get pre-approval for a loan before he goes car shopping.

See car loans for more information.

dice with imagesPetra and Joe want to buy a new TV but they don't have enough cash at the moment. Petra wants to buy it using lay-by and Joe wants to buy it using the store's interest-free deal so he can take it home immediately. Which option would be cheaper?

  • Lay-by is cheaper
  • The interest-free deal is cheaper

That's correct. Lay-by works by paying instalments until the full amount has been paid off. There will be a time limit but the amount and frequency of payments is usually flexible and generally there are no fees for using lay-by.

See interest free deals for more information.

That's incorrect. Interest-free deals may sound good but they can be very costly if you're not careful. You will usually pay an establishment fee as well as monthly fees and if you don't pay off the full amount within the interest-free period you will be charged a very high interest rate. Purchasing using lay-by would be much cheaper.

See interest free deals for more information.

MHC-creditcardsDoes a credit provider need to make sure you can afford the loan repayments on a loan or is it your responsibility to determine how much you can afford to repay?

  • It's your responsibility to make sure you can afford the repayments on a loan
  • Both you and the credit provider are responsible for making sure any loan is appropriate for you
  • The credit provider must determine whether a loan is appropriate for you

That's right! While you must be honest about your financial situation, it is the credit provider who must be satisfied that you can afford the loan repayments and that the loan is appropriate for you.

See consumer credit regulation for more information.

That's wrong! While you must be honest about your financial situation, it is the credit provider who must be satisfied that you can afford the loan repayments and that the loan is appropriate for you.

See consumer credit regulation for more information.

car expensiveJoe has fallen behind on his car loan repayments. A debt collector has been calling him at his work and leaving lots of messages with his colleagues. The debt collector has told his workmates how much Joe owes on the loan.

Joe is angry that the debt collector is harassing him at work and has discussed his debt with his colleagues. Can Joe do anything about this?

  • Yes, he should make a complaint
  • No, he should have kept up his repayments if he didn't want his business to become public

That's right! Debt collectors are not allowed to reveal information about your financial situation to others. Joe should make a complaint to the debt collection company.

See dealing with debt collectors for more information.

That's wrong! Debt collectors are not allowed to reveal information about your financial situation to others. Joe should make a complaint to the debt collection company.

See dealing with debt collectors for more information.


Last updated: 26 Jul 2016