CADS: What Cash Available for Debt Service Means in Finance
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Key terms
- Cash FlowThe net amount of cash moving in and out of your accounts. Positive cash flow means you're earning more than you're spending, while negative cash flow indicates you're spending more than you earn.
- 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.
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