What criteria are used to determine an appropriate debt-management strategy for a client?

• A. Interest rates only
• B. Interest rates, repayment terms, cash flow impact, debt severity, and refinancing options
• C. Credit score and age
• D. Market risk and diversification

Answer: (B)

The key idea is that a debt-management strategy must balance cost, affordability, and options for restructuring. The best set of criteria looks at interest rates, repayment terms, cash flow impact, debt severity, and refinancing options. Interest rates indicate which debts are the most costly to carry. Repayment terms show how long the client will be paying and how that affects monthly payments and total interest. Cash flow impact ensures the plan fits the client’s income and expenses so the debt obligations are sustainable. Debt severity captures how large the debts are and how urgently they need to be addressed, guiding prioritization or consolidation decisions. Refinancing options consider whether the client can replace existing debt with debt at better terms or lower cost. Other choices don’t capture all of these essential factors: focusing only on interest rates misses affordability and structure; credit score and age don’t by themselves drive the strategy; and market risk/diversification relate to investments rather than debt management.