Debenture Definition: Unsecured Debt Explained Clearly
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Key terms
- Debt-to-Income Ratio (DTI)The percentage of your gross monthly income that goes toward paying debts. Lenders use DTI to assess your ability to manage monthly payments and repay borrowed money.
- Debt AvalancheA debt repayment strategy where you pay minimum payments on all debts, then put extra money toward the debt with the highest interest rate. Saves the most money on interest.
- Debt SnowballA debt repayment strategy where you pay off debts from smallest to largest balance, regardless of interest rate. Provides psychological wins that motivate continued progress.
- Credit Card DebtMoney owed on credit cards that carries over from month to month, accruing interest. The average American household carries over $6,000 in credit card debt at 20%+ APR.
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