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Basics Beginner: Managing Your Debt

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1.
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.
2.
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.
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 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.
5.
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.
6.
If you borrow money to buy an item that is able to provide cash income to you, that item can be called _______.
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An investment. Investments provide a return to you, such as income.
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.
Monthly debt payments are current expenses that you need to pay in your budget.
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False. Monthly debt payments are ghosts of prior expenses for which you did not have enough cash to pay at the time.