05 Credit Outcome Assessment - Managing types of credit

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

Arun has multiple sources of debt and wants to pay the lowest amount of interest over time. What strategy should he use?

• Snowball method

• Make minimum payments

• High rate method

• Consolidate multiple debts into one new loan

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

• Consolidate all debts into one payment to simplify the process

• Pay off the debt with the highest interest rate first to save on interest

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

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

• Your wages can be garnished

• You could be denied a mortgage

• You might lose your health insurance

• Your car could be repossessed

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

• Older individuals are not allowed to apply for credit cards

• Young people can get loans with no interest

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

• Credit scores are automatically higher for those under 30

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

• It increases the overall interest you pay, but shortens the loan term

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

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

Imagine you’re renting an apartment with a friend after high school. Your friend wants to get NFL Ticket/Sports TV Package but can’t because they have bad credit due to a history of late payments. They ask if you’ll sign up for it and assure you they’ll take care of the payments.

How would you respond?

What advice would you give your roommate?

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?

• Bargaining for a great sales price

• Receiving a large down payment

• Qualifying for a low interest rate

• Having a wide selection of term lengths

Which credit card repayment method would result in the most interest paid over time?

• 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