Quiz: Debt Management 5 questions · 80% to pass 1. Which of the following is typically considered 'good debt'?Credit card balance from a vacationA mortgage on a rental propertyA personal loan for furnitureA payday loan for rentGood debt finances assets that appreciate or generate income. A mortgage on a rental property does both, making it productive leverage.2. What does debt-to-income ratio measure?Total debt divided by total assetsMonthly debt payments divided by gross monthly incomeAnnual interest payments divided by net incomeCredit card balance divided by credit limitDTI is calculated by dividing your total monthly debt payments by your gross (pre-tax) monthly income.3. What is generally considered a healthy debt-to-income ratio?Under 10%Under 36%Under 50%Under 75%A DTI below 36% is considered healthy. Above 43%, most conventional mortgage lenders will decline your application.4. The avalanche method prioritizes paying off debt with the:Smallest balance firstLargest balance firstHighest interest rate firstOldest account firstThe avalanche method targets the highest-interest debt first, which minimizes total interest paid over time.5. Why might someone choose the snowball method over the avalanche method?It saves more money on interestIt provides faster psychological wins that maintain motivationBanks require itIt improves your credit score fasterThe snowball method pays off the smallest balances first, giving you quick wins. This psychological momentum helps many people stay committed to debt repayment. Check answers Retake quiz Back to lesson Next lesson →