Question

<!--td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}--> Why is the offering of “teaser loans” by commercial banks a cause of economic concern?

1. The teaser loans are considered to be an aspect of subprime lending and banks may be exposed to the risk of defaulters in future.
2. In India, the teaser loans are mostly given to inexperienced entrepreneurs to set up manufacturing or export units.

Which of the statements given above is/are correct?

• A. 1 only
• B. 2 only
• C. Both 1 and 2
• D. Neither 1 nor 2

Answer 1

The correct option is C Both 1 and 2

<!--td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}--> A teaser loan is any loan that offers a lower interest rate for a fixed amount of time as a purchase incentive. Common teaser loans include credit cards with low introductory offers and adjustable-rate mortgages. Borrowers must be aware of the rates that will apply after a teaser rate expires. It acts as an aspect of subprime lending and banks may be exposed to the risk of defaulters in future. In India, the teaser loans are mostly given to inexperienced entrepreneurs to set up manufacturing or export units.