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.
A disadvantage of refinancing a short-term loan to a long-term loan is that _______.
It may cost more in the long term. Taking longer to pay a short-term loan costs more over time.
3.
If you are in debt, why is it important to first deal with the causes of the debt?
It can prevent them from recurring. Though not guaranteed to, there is a good chance you can prevent future occurrences.
4.
Making a plan to eliminate your debt begins with _______.
Setting a target date. Setting a target date will help you determine how much to pay toward the debt each month.
5.
Which of the following is TRUE about using a consumer credit counseling or debt consolidation service?
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.
6.
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.
7.
When you pay back a loan, the amount of the monthly loan payments is determined by _______.
All of the above. Principal, interest, and the term (months) of the loan determine how much each monthly payment should be.
8.
Paying only the minimum amount due on a credit card bill _______.
Increases the cost and the time it takes to repay. It is best to repay higher interest rate loans faster.