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Basics Beginner: Managing Your Debt

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1.
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.
2.
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.
3.
Which of the following is true about bankruptcy?
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It should be your last resort to resolve debt problems. Chapter 7 is liquidation bankruptcy, while Chapter 13 restructures your debt.
4.
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.
5.
Which of the following would most likely give you additional tax savings on your loan interest?
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Home equity loan. Interest on home equity loans may be tax deductible.
6.
When you pay back a loan, the amount of the monthly loan payments is determined by _______.
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All of the above. Principal, interest, and the term (months) of the loan determine how much each monthly payment should be.
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.
To determine how much you should pay each month on credit card bills, _______.
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Use a financial calculator. Enter the number of months, interest rate, and principal balance to calculate the monthly payment.