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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.
Which of the following is TRUE about using a consumer credit counseling or debt consolidation service?
Choose wisely. There is only one correct answer.
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.
3.
A good way to reduce your monthly debt payments is to pay only the minimum amount due on credit card statements.
Choose wisely. There is only one correct answer.
False. Paying the minimum amount due on credit card statements will only increase the time and money paid on a debt.
4.
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.
5.
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.
6.
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.
7.
Making a plan to eliminate your debt begins with _______.
Choose wisely. There is only one correct answer.
Setting a target date. Setting a target date will help you determine how much to pay toward the debt each month.
8.
Which of the following would most likely give you additional tax savings on your loan interest?
Choose wisely. There is only one correct answer.
Home equity loan. Interest on home equity loans may be tax deductible.