Choose wisely. There is only one correct answer to each question.
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1.
Which of the following is true about bankruptcy?
It should be your last resort to resolve debt problems. Chapter 7 is liquidation bankruptcy, while Chapter 13 restructures your debt.
2.
Monthly debt payments are current expenses that you need to pay in your budget.
False. Monthly debt payments are ghosts of prior expenses for which you did not have enough cash to pay at the time.
3.
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.
4.
Which type of goods usually become worth less over time?
Consumer goods. Consumer goods are bought to be used up. Investment goods are bought to provide income or appreciation of value.
5.
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.
6.
Your creditors may be willing to work out debt repayments rather than have you file for bankruptcy.
True. Creditors would rather receive some payment than risk not getting any payments should you resort to bankruptcy.
7.
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.
8.
You will usually have to pay additional costs for the privilege of consolidating your loans.
True. Take these costs into account before you consolidate loans.