Choose wisely. There is only one correct answer to each question.
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1.
Debt is always a bad thing.
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.
2.
Which of the following would most likely give you additional tax savings on your loan interest?
Home equity loan. Interest on home equity loans may be tax deductible.
3.
When calculating payments for debts that use different interest rates, it is most effective to use the debt with the highest interest rate.
True. This can help you pay off your total debt faster.
4.
Which type of loan typically has a lower interest rate: secured or unsecured?
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.
5.
Your recurring monthly debt payments (such as credit cards) should be considered _______ in your budget.
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.
6.
If you file for bankruptcy, the bankruptcy will stay on your credit record for _______ years.
10. After 10 years, it will disappear.
7.
If you speak to your creditors when you start falling behind on your debts, they will refuse to work with you to make it easier to pay your debts.
False. Though it isn't guaranteed, they may revise your loan terms to make it easier for you to keep paying. It is in their interest to get at least something out of you.
8.
You probably have too much debt if the percentage of your monthly loan payments (excluding your mortgage) to your monthly take-home pay exceeds _______.
15%. Financial advisors agree that consumer debt in excess of 15–20% is probably too much debt and should be reduced.