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Loan and EMI Quiz: 10 Questions with Answers (India)

Written by the Quizzeela team · Reviewed by Utsav Raj
Last checked · 10 questions · Medium

A loan can help or hurt, depending on how well you understand it. Check your loan basics in 10 questions.

New to this topic? Read the guide firstEMI Calculation: Formula, Examples and How EMI Is Calculated Play as a timed quiz and earn coins

1An EMI is made up of:

  1. Principal and interest
  2. Only principal
  3. Insurance and tax
  4. Only interest
Show answer
Answer: A. Principal and interest. Each EMI repays part of the principal plus the interest due for that month.

2In the early years of a home loan, most of each EMI goes towards:

  1. Interest
  2. Insurance
  3. Principal
  4. Processing fee
Show answer
Answer: A. Interest. Interest is charged on the outstanding balance, which is highest at the start.

3A longer loan tenure usually means:

  1. The same total cost
  2. Higher EMI and less total interest
  3. No interest
  4. Lower EMI but more total interest
Show answer
Answer: D. Lower EMI but more total interest. Stretching the loan lowers each EMI, but you pay interest for longer, so the total cost rises.

4A secured loan is one that:

  1. Is backed by an asset such as a house, car or gold
  2. Is given only by friends
  3. Needs no documents
  4. Has no interest
Show answer
Answer: A. Is backed by an asset such as a house, car or gold. Secured loans have collateral the lender can take if you do not repay, so rates are usually lower.

5Which is usually an unsecured loan?

  1. Gold loan
  2. Personal loan
  3. Home loan
  4. Car loan
Show answer
Answer: B. Personal loan. Personal loans have no collateral, so they usually charge higher interest.

6Prepaying part of a loan early usually:

  1. Has no effect
  2. Increases total interest
  3. Cancels the loan
  4. Reduces total interest
Show answer
Answer: D. Reduces total interest. Paying down the principal early means less interest is charged on it afterwards.

7Under RBI rules, can banks charge a prepayment penalty on floating-rate loans to individuals (non-business)?

  1. No
  2. Only for home loans above ₹1 crore
  3. Only on Sundays
  4. Yes, always
Show answer
Answer: A. No. The RBI does not allow foreclosure or prepayment charges on floating-rate term loans to individual borrowers for non-business purposes.

8A floating interest rate:

  1. Is set by you
  2. Can change with a benchmark such as the repo rate
  3. Is always 0%
  4. Never changes
Show answer
Answer: B. Can change with a benchmark such as the repo rate. Floating rates move with a benchmark, so EMIs or tenure can change when rates change.

9Missing EMI payments can:

  1. Improve your credit score
  2. Reduce your loan
  3. Hurt your credit score and add penalties
  4. Have no effect
Show answer
Answer: C. Hurt your credit score and add penalties. Late or missed EMIs are reported to credit bureaus and lower your score.

10Before taking a loan, it is wise to compare:

  1. Only the processing time
  2. Only the EMI
  3. Only the bank's logo
  4. The interest rate, fees and total cost over the tenure
Show answer
Answer: D. The interest rate, fees and total cost over the tenure. The full cost, including fees and total interest, tells you which loan is really cheaper.
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Sources: Reserve Bank of India and bank loan guides. For learning only, not financial, tax or insurance advice. Found a mistake? Use "Report a mistake" in the timed quiz.