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Basics Beginner: Managing Your Debt

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1.
To determine how much you should pay each month on credit card bills, _______.
Choose wisely. There is only one correct answer.
Use a financial calculator. Enter the number of months, interest rate, and principal balance to calculate the monthly payment.
2.
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.
3.
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.
4.
Which of the following would most likely give you additional tax savings on your loan interest?
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Home equity loan. Interest on home equity loans may be tax deductible.
5.
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.
6.
When you pay back a loan, the amount of the monthly loan payments is determined by _______.
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All of the above. Principal, interest, and the term (months) of the loan determine how much each monthly payment should be.
7.
Which type of loan typically has a lower interest rate: secured or unsecured?
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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.
8.
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.