Debt Avalanche Method

Definition: The debt avalanche method is a repayment strategy where you pay off debts with the highest interest rates first, while making minimum payments on others. This approach minimizes the total amount of interest paid and shortens the repayment timeline.

Example: If you have three debts – a $2,000 credit card at 20% interest, a $5,000 personal loan at 10%, and a $10,000 student loan at 5% – you would focus on paying off the credit card first, then the personal loan, and finally the student loan.