Judge debt by its purpose, rate and total cost: test your skills
Not all debt is created equal — the interest rate and what the money buys tell you which kind you have. Answer each question to see the explanation; your score appears at the end.
This test checks that you can
- Apply the two-question test
- Calculate your debt-to-income ratio
- See how term length changes total cost
- Practice
1. Which two questions sort debt?
- Practice
2. A longer loan term usually means…
- Practice
3. DTI is…
- Key idea
4. Which statement best explains "Rate and purpose decide"?
- Key idea
5. Which statement best explains "A low payment can hide a high cost"?
- Key idea
6. Which statement best explains "Even good debt needs a limit"?
- Action plan
7. In the action plan, which step comes first?
- Mistake to avoid
8. Which of these is a mistake this lesson warns against?
- Mistake to avoid
9. Which of these is a mistake this lesson warns against?
Debt payments are $1,500 a month and gross income is $6,000. What is your DTI?
Show the answer
25%
$1,500 ÷ $6,000 = 0.25 = 25%.
For your largest debt, multiply the monthly payment by the months left and compare it with the balance.
More tests in this bootcamp
- Judge debt by its purpose, rate and total cost
- Choose a debt payoff plan: avalanche or snowball
- Compare debt consolidation without missing the fees
- Use credit cards without carrying interest
- Understand what moves your credit score
- Check your credit report and question errors
- Protect your identity and know the recovery steps
- Respond to debt collectors with records and confidence
- Understand your student loan repayment options
- Compare car loans beyond the monthly payment
- Decode your mortgage payment: principal, interest, taxes and insurance
- Final exam: Debt and credit