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Basics Beginner: Managing Your Debt

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1.
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.
2.
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.
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.
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.
5.
Your creditors may be willing to work out debt repayments rather than have you file for bankruptcy.
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True. Creditors would rather receive some payment than risk not getting any payments should you resort to bankruptcy.
6.
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.
7.
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.
8.
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.