What's Your Debt IQ?

Household debt has been rising steadily for some time. If that holds true for your household, you may be trying to find a way to reverse the trend. 

Total Household Debt(Source: Center for Microeconomic Data of the Federal Reserve Bank of New York)

You can get out of debt. The first step is to understand the nature of your debt. For instance, it's important to understand what types of debt you are carrying, what types of debts are costlier over time, and how your debt compares with your income. 

It also helps to find out what debt relief options are available for your specific circumstances. A ClearOne Advantage Certified Debt Specialist can help you determine that with a free debt estimate and savings analysis.

How well do you understand your debt? Take the following debt IQ quiz to find out. 

Click + next to each question to see the correct answer

Correct Answer: 36 percent. According to Investopedia, a household should spend a maximum of 28 percent of its gross monthly income on total housing expenses and it should spend no more than 36 percent on total debt, including housing, car loans, and other forms of debt like credit cards.

Correct Answer: Credit card debt. Credit card debt typically carries a higher interest rate than some other forms of debt. Further, the way that credit card interest accrues makes it a costly way to finance purchases. 

Correct Answer: Focusing on the resolution of debts with the highest interest rates first. Doing so will save you more in interest over time, which will, in turn, help you get out of debt more quickly. This approach requires self-discipline, but it pays off in the long run.

Correct Answer: Bankruptcy. Successfully filing for bankruptcy triggers an automatic stay which grants you protection from creditors for the length of the stay. However, bankruptcy has a severe negative effect on your credit score and should be considered as a last resort in terms of credit resolution.

Correct Answer: Only after it negotiates the settlement terms, the client agrees to those terms, and the client makes at least one payment.  According to the Federal Trade Commission, debt settlement companies can only collect fees once all three of these actions have been taken. That differentiates debt settlement from some other forms of debt relief that require upfront fees and ongoing fees as part of the process.

Correct Answer: All of the above. Debt consolidation loans are a good choice for some consumers who have less than $10,000 in unsecured debt, but they may not be the best option for those carrying larger balances.

Correct Answer: All of the above. You can read more about consumer debt protections under this act here.

Correct Answer: Being able to secure a better-paying job as a direct consequence of the loan. This hypothetical situation highlights an important truth about debt, which is: You should always think about debt strategically. When considering taking on any new debt, evaluate whether doing so will improve your ability to handle your finances in the long term or will impede your ability to do so. 

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What is your debt IQ?

How to Score Results

8 correct answers: Congratulations! Your debt IQ is pretty high!  That means you understand debt and you can likely manage your finances with success. It also means that if you find yourself struggling with a heavy debt load, you know that exploring your debt relief options is the way to go.

6-7 correct answers: You have a good grasp of how debt works. You need to wrap your mind around some of the more advanced concepts if you want to get out of debt quickly. 

4-5 correct answers: You may understand some debt-related concepts but you still need to educate yourself on debt relief. A ClearOne Advantage Certified Debt Specialist can likely help you to do just that.

0-3 correct answers: Financial understanding is a bit fuzzy for you, but not all is lost. We highly recommend that you speak to a ClearOne Certified Debt Specialist who can clarify your available options and offer you a realistic way out of debt. 


Regardless of your debt IQ, leveraging the expertise of a Certified Debt Specialist can help you make the most of your financial situation. Defeat your debt the smart way. Find out how today. 

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