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Basics Beginner: Managing Your Debt

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1.
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.
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.
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.
4.
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.
5.
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.
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.
You will usually have to pay additional costs for the privilege of consolidating your loans.
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True. Take these costs into account before you consolidate loans.
8.
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.