Which of the following defines a characteristic of high-cost loans?

High-cost loans are primarily characterized by their intended use, which is specifically for personal, family, or household purposes. This definition helps distinguish high-cost loans from other types of financial products that may not necessarily serve these personal needs. By focusing on personal, family, or household purposes, it becomes clear that these loans are designed to help individuals or families with expenses like purchasing a home, funding renovations, or covering financial emergencies.

Understanding this characteristic is crucial, especially since laws and regulations surrounding high-cost loans, such as the Home Ownership and Equity Protection Act (HOEPA), are designed to protect consumers from predatory lending practices. This regulation emphasizes the need for transparency and fair practices in loans meant for these personal circumstances.

Other characteristics, such as loan limits or the nature of the borrower (like being a non-profit organization), do not directly define a high-cost loan under the applicable regulations. The interest rate also is not specifically designated as 5% or lower; high-cost loans can have varying interest rates, so this option does not align with the core definition.