Debt

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Quick Quiz

Not all debt is created equal, and no matter what your financial circumstances may be, it pays to have a thorough understanding of debt. Take the quiz to test — and improve — your debt knowledge.

1

What is the definition of interest on debt?

A
Curiosity about money
B
A fee you pay to your lender in exchange for the right to use the borrowed funds
C
A fee you pay every time you withdraw money from your bank account
D
A fee you pay to transfer funds between different accounts

Correct!

Interest is a fee that you pay to a lender in exchange for using borrowed funds.

Not quite.

Interest is a fee you pay to your lender in exchange for the right to use the borrowed funds.

2

Which of the following could be considered good debt?

A
Auto loan
B
Apartment lease
C
Student loan
D
Personal loan

Correct!

A student loan could be considered a kind of investment in your future that will allow you to earn more money later, making it a good kind of debt. However, it is not a guarantee.

Not quite.

A student loan could be considered good debt because it has the potential to earn you more money later, though it is not a guarantee.

3

How could you determine whether your debt load is more than you can afford?

A
Calculate your debt-to-income ratio
B
Add up your expenses
C
Call your financial service provider
D
Calculate your net worth

Correct!

Calculating your debt-to-income ratio will indicate whether your debt load is more than you can afford.

Not quite.

By comparing the amount you owe to the amount you earn — a calculation known as your debt-to-income ratio — you can determine whether your debt load is more than you can afford.

4

How do you calculate net worth?

A
Money earned minus money owed
B
Good debt minus bad debt
C
Assets minus liabilities
D
Savings plus annual income

Correct!

You calculate net worth by subtracting your liabilities (such as debts) from your assets (savings/assets).

Not quite.

You calculate net worth by subtracting your liabilities (such as debts) from your assets (savings/assets).

5

After bankruptcy, which one of the following is a way you can rebuild your financial credibility?

A
Obtain a secured credit card account or credit-building loan
B
Create an offshore account in a foreign country
C
Request a cash advance on your wages
D
Take out several new loans

Correct!

Where available, a secured credit card account is a line of credit that is 50 to 100 percent of a cash savings deposit. Credit-building loans of small amounts may also be an option.

Not quite.

Where available, a secured credit card account is a line of credit that is 50 to 100 percent of a cash savings deposit. Credit-building loans of small amounts may also be an option.

Your Score

Nice job!

You’re a debt master — check out these tips to stay successful.

Nice job!

You’re on the path to becoming a debt master — check out these resources to become even more knowledgeable about debt.

Too Bad!

You’re new to personal finance with lots of debt knowledge potential — check out these resources to understand debt even better.

Good Debt or Bad Debt?

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