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Basics Beginner: Managing Your Debt

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1.
A good way to reduce your monthly debt payments is to pay only the minimum amount due on credit card statements.
Choose wisely. There is only one correct answer.
False. Paying the minimum amount due on credit card statements will only increase the time and money paid on a debt.
2.
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.
3.
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.
4.
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.
5.
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.
6.
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.
7.
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.
8.
Which of the following types of loans would you expect to have the lowest interest?
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Short-term secured. Short-term and secured loans generally have lower rates than long-term or unsecured loans.