Choose wisely. There is only one correct answer to each question.
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1.
You probably have too much debt if the percentage of your monthly loan payments (excluding your mortgage) to your monthly take-home pay exceeds _______.
15%. Financial advisors agree that consumer debt in excess of 15–20% is probably too much debt and should be reduced.
2.
Which of the following types of loans would you expect to have the lowest interest?
Short-term secured. Short-term and secured loans generally have lower rates than long-term or unsecured loans.
3.
To determine how much you should pay each month on credit card bills, _______.
Use a financial calculator. Enter the number of months, interest rate, and principal balance to calculate the monthly payment.
4.
Which of the following is TRUE about using a consumer credit counseling or debt consolidation service?
Creditors are willing to work with these services to renegotiate or consolidate your debt. Although creditors are willing to work with you and a credit counseling or debt consolidation service, you must be wary because some are shady, charge high fees, or could damage your credit rating if they renegotiate your debt.
5.
If you are in debt, why is it important to first deal with the causes of the debt?
It can prevent them from recurring. Though not guaranteed to, there is a good chance you can prevent future occurrences.
6.
Monthly debt payments are current expenses that you need to pay in your budget.
False. Monthly debt payments are ghosts of prior expenses for which you did not have enough cash to pay at the time.
7.
A disadvantage of refinancing a short-term loan to a long-term loan is that _______.
It may cost more in the long term. Taking longer to pay a short-term loan costs more over time.
8.
Debt is always a bad thing.
False. Provided we use it wisely and pay it back, debt can provide us with many much-needed things, including assets that can rise in value.