Paying Off Debt Answers

Which of the following is not something that should be considered when creating a debt payment plan?

Jerry has a credit card debt of $15,600 that he would like to reduce by applying $8,500 of his inheritance money to the balance. In addition, he would like to modify his debt payment plan to pay off the remaining balance in 24 months rather than 60 months. His credit card has an APR of 18%. How much will these changes save Jerry in finance charges (interest)?

In general, reducing the number of periods (n) used to pay off credit card debt but keeping the present value (PV) and interest rate (i) the same will __________.

Frank has four different credit cards, the balances and interest information of which are outlined in the table below. As Frank was developing a debt payment plan, Rick suggested that he pay off the credit cards beginning with the highest interest rate, working his way down. If Frank chooses to follow Rick’s advice, in what order should Frank plan on paying off his credit cards?Credit CardBalanceAPRA$2,380 19%B$4,500 15%C$1,580 17.50%D$900 21%

Michelle has four credit cards with the balances and interest rates listed below. Rather than budget to pay each of the credit cards off in 36 months, Michelle would like to pay them off one at a time based on the balance for each credit card. In which order should Michelle pay off her credit cards?Credit CardBalanceAPR#1$4,380 17%#2$1,365 19%#3$2,480 23%#4$5,000 15%

Sarah has a credit card balance of $9,450 with an APR of 17%. With her current budgeted payment, Sarah will be able to pay off this debt in 36 months. But Sarah’s best friend just invited her to spend two months in Europe with her in 9 months. Wanting to have her credit card balance paid off before she goes to Europe, Sarah decides to take on a second job. What additional monthly income will Sarah need in order to pay off her credit card in 9 months?

Which answer choice best describes the debt snowball method?

Cynthia had a credit card with a 17% APR and a $3,265 balance. She had budgeted to have the credit card paid off in 24 months. But after missing a single monthly payment, Cynthia’s credit card company has increased her interest rate to 21%. How much extra will Cynthia have to pay in finance charges (interest) because of the increase in her APR if she still pays off the credit card in 24 months?

Cesar is excited that he only has 12 months left before he pays off his credit card completely. His current balance is $3,750 and his APR is 17.5%. But when he is involved in a car accident, he is forced to use his credit card to pay a $1,000 deductible to get his car fixed. How much will Cesar’s minimum monthly payment increase if he still wants to pay off his credit card in 12 months?

Michelle has four credit cards with the balances and interest rates listed below. If Michelle wanted to pay off all four credit cards in 36 months, what would her total monthly credit card payment be?Credit CardBalanceAPR#1$4,380 17%#2$1,365 19%#3$2,480 23%#4$5,000 15%

Which method of debt reduction saves you the most money in interest?

Which of the following is not a step in creating a debt payment plan?

Frank has four different credit cards, the balances and interest information of which are outlined in the table below. He would like to consolidate his credit cards to a single credit card with an APR of 18% and pay off the balance in 24 months. What will his monthly credit card payment be?Credit CardBalanceAPRA$2,380 19%B$4,500 15%C$1,580 17.50%D$900 21%

In general, reducing the present value (PV) of a credit card while keeping the number of periods (n) and interest rate (i) the same will _____.

Alex wants to pay off his credit card balance before he gets married. He decides to take the $2,300 out of his savings and apply it to his credit card debt of $5,390. The credit card has an APR of 16.5%. What will Alex's minimum monthly credit card payment be in order to pay off his debt in 14 months?