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Basics Beginner: Managing Your Debt

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1.
When calculating payments for debts that use different interest rates, it is most effective to use the debt with the highest interest rate.
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True. This can help you pay off your total debt faster.
2.
If you are in debt, why is it important to first deal with the causes of the debt?
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It can prevent them from recurring. Though not guaranteed to, there is a good chance you can prevent future occurrences.
3.
Paying only the minimum amount due on a credit card bill _______.
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Increases the cost and the time it takes to repay. It is best to repay higher interest rate loans faster.
4.
Which of the following are ways to lower your monthly debt payments?
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All of the above. These are all ways to reduce your monthly debt payments.
5.
Which of the following is TRUE about using a consumer credit counseling or debt consolidation service?
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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.
6.
A good way to reduce your monthly debt payments is to pay only the minimum amount due on credit card statements.
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False. Paying the minimum amount due on credit card statements will only increase the time and money paid on a debt.
7.
A disadvantage of refinancing a short-term loan to a long-term loan is that _______.
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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.
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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.