Debt Avalanche
Financial term in the Budgeting category
Definition
A 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.
Related Terms
Debt Snowball
A debt repayment strategy where you pay off debts from smallest to largest balance, regardless of interest rate. Provides psychological wins that motivate continued progress.
Interest Rate
The percentage charged by a lender for borrowing money, or earned on savings and investments. Can be fixed or variable depending on the financial product.
Frequently Asked Questions
What is Debt Avalanche?
A 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.
Why is Debt Avalanche important in personal finance?
Debt Avalanche is an important budgeting concept that helps individuals make better financial decisions. Understanding Debt Avalanche can improve your financial planning and help you achieve your money goals.
How does Debt Avalanche relate to Debt Snowball?
Debt Avalanche and Debt Snowball are related financial concepts. A 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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