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Basics Beginner: Managing Your Debt

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1.
Which type of loan typically has a lower interest rate: secured or unsecured?
Choose wisely. There is only one correct answer.
Secured. Secured loans, which are backed by collateral (such as a house or car), have lower interest rates, because having collateral lowers the risk of loss for the lender.
2.
You probably have too much debt if the percentage of your monthly loan payments (excluding your mortgage) to your monthly take-home pay exceeds _______.
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15%. Financial advisors agree that consumer debt in excess of 15–20% is probably too much debt and should be reduced.
3.
Which type of goods usually become worth less over time?
Choose wisely. There is only one correct answer.
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 using a consumer credit counseling or debt consolidation service?
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Creditors are willing to work with these services to renegotiate or consolidate your debt. Although creditors are willing to work with you and a credit counseling or debt consolidation service, you must be wary because some are shady, charge high fees, or could damage your credit rating if they renegotiate your debt.
5.
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.
6.
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.
7.
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.
8.
You will usually have to pay additional costs for the privilege of consolidating your loans.
Choose wisely. There is only one correct answer.
True. Take these costs into account before you consolidate loans.