Understanding Debt

1. What is debt?

Money you save for future use
Money you owe that must be repaid
Money given as a gift
Money earned from work

2. What makes secured debt different from unsecured debt?

Secured debt has higher interest rates
Secured debt requires collateral
Unsecured debt must be repaid immediately
Unsecured debt is always cheaper

3. Which of the following is an example of unsecured debt?

Mortgage
Car loan
Personal loan
Land financing

4. Why do unsecured loans usually have higher interest rates?

They are easier to repay
They are backed by assets
They are riskier for lenders
They take longer to process

5. Kwame takes a loan to expand his business. This is:

Bad debt
Risky debt
Potentially good debt
Unnecessary debt

6. Ama takes a loan for a birthday party. Main risk?

No interest
Increases income
No future value created
Loan gets cancelled

7. TRUE statement about debt?

All debt is bad
Avoid debt always
Debt can be useful if used correctly
Debt has no impact

8. What happens if you default on secured loan?

Nothing
Higher interest
Lender takes collateral
More time given

9. Main risk of multiple loans?

Lower rates
Over-indebtedness
Faster approval
Better credit score

10. BEST reason to take a loan?

Impress friends
Luxury spending
Invest to increase income
Avoid using money

1. What is debt?

Money you save for future useMoney you owe that must be repaidMoney given as a giftMoney earned from work

2. What makes secured debt different from unsecured debt?

Secured debt has higher interest ratesSecured debt requires collateralUnsecured debt must be repaid immediatelyUnsecured debt is always cheaper

3. Which of the following is an example of unsecured debt?

Secured debt has higher interest ratesSecured debt requires collateralUnsecured debt must be repaid immediatelyUnsecured debt is always cheaper

4. Why do unsecured loans usually have higher interest rates?

Secured debt has higher interest ratesSecured debt requires collateralUnsecured debt must be repaid immediatelyUnsecured debt is always cheaper

5. Kwame takes a loan to expand his small business, expecting higher income. This is best described as:

Bad debtRisky debtPotentially good debtUnnecessary debt

6. Ama takes a loan to throw a birthday party. What is the main risk of this decision?

The loan will have no interestThe loan increases her incomeThe loan does not create future value The lender will cancel the loan

7. Which statement is TRUE about debt?

All debt is badDebt should always be avoidedDebt can be useful if used correctlyDebt has no impact on your future

8. What happens if a borrower defaults on a secured loan?

Nothing happensThe lender increases interestThe lender can take the collateral The borrower gets more time automatically

9. Yaw takes multiple loans at the same time without checking how much he needs to repay monthly. What is the biggest risk?

Lower interest ratesOver-indebtednessFaster loan approvalBetter credit score

10. Which of the following is the BEST reason to take a loan?

To impress friendsTo buy luxury items immediatelyTo invest in something that can increase incomeTo avoid using your own money

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LESSON 1: UNDERSTANDING DEBT