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Basics Beginner: Managing Your Debt

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1.
You will usually have to pay additional costs for the privilege of consolidating your loans.
Choose wisely. There is only one correct answer.
True. Take these costs into account before you consolidate loans.
2.
Which of the following is TRUE about using a consumer credit counseling or debt consolidation service?
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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.
Your creditors may be willing to work out debt repayments rather than have you file for bankruptcy.
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True. Creditors would rather receive some payment than risk not getting any payments should you resort to bankruptcy.
4.
Debt is always a bad thing.
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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.
5.
Which of the following are ways to lower your monthly debt payments?
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All of the above. These are all ways to reduce your monthly debt payments.
6.
Making a plan to eliminate your debt begins with _______.
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Setting a target date. Setting a target date will help you determine how much to pay toward the debt each month.
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 _______.
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15%. Financial advisors agree that consumer debt in excess of 15–20% is probably too much debt and should be reduced.
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.