Paying Off High-Interest Debt Part 2

After starting an emergency fund, what should you prioritize if you have high-interest debt?

Paying off the high-interest debt.

According to this lesson, what interest-rate range is considered the cutoff for high-interest debt?

Around 10–12%.

Why is high-interest debt a major obstacle to financial progress?

Because interest can cause your debt to grow and cancel out some of the progress you make.

What is the first step when creating a debt repayment plan?

List all of your debts.

What information should you record for each debt?

The total balance, interest rate, minimum payment, and payment due date.

What is the debt avalanche method?

Paying extra toward the debt with the highest interest rate while making minimum payments on the other debts.

What is the debt snowball method?

Paying off the debt with the smallest balance first while making minimum payments on the other debts.

What is the main difference between the debt avalanche and snowball methods?

Avalanche prioritizes the highest interest rate, while snowball prioritizes the smallest balance.

What is a debt amortization calculator used for?

To estimate how long it will take to pay off debt and how much interest you may pay.

What can you do if your current income doesn't leave enough room for debt repayment?

Review your numbers and consider reducing expenses, making temporary sacrifices, increasing income, or accepting a longer repayment timeline.

Why is it important to make a realistic debt repayment plan?

So you can make progress without creating an unsustainable financial situation.

What should you do if you can't afford your desired debt repayment amount?

Reevaluate your budget and determine what you can realistically change rather than committing to an amount you can't sustain.