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Basics Beginner: Managing Your Debt

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1.
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.
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.
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.
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.
You probably have too much debt if the percentage of your monthly loan payments (excluding your mortgage) to your monthly take-home pay exceeds _______.
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15%. Financial advisors agree that consumer debt in excess of 15–20% is probably too much debt and should be reduced.
7.
Your recurring monthly debt payments (such as credit cards) should be considered _______ in your budget.
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Ghosts of prior expenses. Although you may pay them every month, they are not current expenses. They are remnants of past expenses that you must pay off over time.
8.
Which type of goods usually become worth less over time?
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Consumer goods. Consumer goods are bought to be used up. Investment goods are bought to provide income or appreciation of value.