05 Credit Outcome Assessment - Managing types of credit

Front

Hannah is determined to eliminate her debt quickly as it is affecting her financial stability. Which of the following actions would NOT be advisable for her to take? Cutting down on dining out to save more money, Selling unused items to generate extra cash, Setting up automatic payments to avoid late fees, Applying for another credit card in case she runs out of cash

Back

Applying for another credit card in case she runs out of cash

Front

Arun has multiple sources of debt and wants to pay the lowest amount of interest over time. What strategy should he use? Options: Snowball method, Make minimum payments, High rate method, Consolidate multiple debts into one new loan

Back

High rate method

Front

What is the primary focus of the Debt Snowball method when managing multiple debts?

Back

Concentrate on paying off the smallest debt first while making minimum payments on others

Front

What is one possible outcome of failing to repay your federal student loans?

Back

Your wages can be garnished

Front

Why is it advantageous to start building your credit history early in life?

Back

A strong credit history can help you secure better loan terms in the future (car, credit card, mortgage).

Front

Why might it be beneficial to make additional payments on a fixed-rate mortgage?

Back

Extra payments reduce the principal balance, leading to less interest paid over time

Front

If you're struggling to keep up with your car loan payments and need to stick to a strict budget, which of the following suggestions is the least advisable? Seek additional income by getting a part-time job, working overtime, or asking for help from family if they are able to assist; Ignore some of your debt payments to concentrate on managing the most costly or largest debts; Maintain all payments and contact your creditors to negotiate for reduced monthly payments, lower interest rates, or extended terms

Back

Ignore some of your debt payments to concentrate on managing the most costly or largest debts

Front

Nora is planning to buy a new car and wants to ensure she gets the best financing deal possible. An excellent credit score will help her with which aspect of car financing?

Back

Qualifying for a low interest rate

Front

Which credit card repayment method would result in the most interest paid over time? Options: Paying the full balance each month, Paying half of the balance each month, Paying the minimum required amount each month, Paying the minimum required amount each month with frequent late payments

Back

Paying the minimum required amount each month with frequent late payments

Front

Mark borrowed $500 from a payday lender in June. By December, he had repaid a total of $1,250. What is the most plausible explanation for this situation?

Back

Payday loans require full repayment within a short period, and failing to do so results in costly renewals, which Mark did multiple times.