Debt & Credit Fundamentals | FinTrex

Quiz progress0 / 10 answered

Question 1 of 10

What does APR generally help describe?

The annualised cost of borrowing, with rules varying by product and jurisdictionA guaranteed monthly paymentA credit scoreThe principal balance only

Question 2 of 10

Why can making only a minimum credit-card payment keep debt outstanding for a long time?

A larger share of each payment may go to interest and the principal falls slowlyMinimum payments remove interestThe balance is frozenThe lender stops charging

Question 3 of 10

What is principal?

The amount borrowed before interest and chargesThe interest rate onlyA late feeA credit limit

Question 4 of 10

Why does a higher interest rate usually increase borrowing cost?

More interest accrues on the outstanding balance, all else equalIt reduces principal automaticallyIt removes feesIt shortens every loan

Question 5 of 10

What is the debt avalanche method?

Prioritising extra payments toward the highest interest rate debtPaying the smallest balance first regardless of rateIgnoring minimum paymentsRefinancing every month

Question 6 of 10

What is the debt snowball method?

Prioritising the smallest balance first for quicker account closuresPrioritising the highest rate onlyPaying random debtsStopping all payments

Question 7 of 10

Before refinancing a debt, what should be compared?

New rate, fees, term, total cost and any penaltiesOnly the new monthly paymentOnly the lender's advertOnly the old balance

Question 8 of 10

What can happen if the repayment term is extended?

Monthly payments may fall while total interest paid may riseInterest must fall to zeroPrincipal disappearsThe APR becomes irrelevant

Question 9 of 10

Why check a payoff figure before clearing a loan?

The exact amount can include accrued interest or other permitted chargesThe current statement balance always equals the payoff amountIt increases the interest rateIt changes your income

Question 10 of 10

If someone is struggling to make required debt payments, what is a prudent step?

Contact the lender or a reputable debt-advice service earlyIgnore the debt until it disappearsBorrow from every available source immediatelyStop opening statements