Which debt does the avalanche method target first?
A Smallest balance
B Highest interest rate
C Newest account
D Largest monthly payment
Answer: B. Highest interest rate The avalanche method directs extra payments toward the debt with the highest interest rate.
How should debts be ordered for a basic avalanche plan?
A Highest rate to lowest
B Smallest balance to largest
C Newest to oldest
D Largest payment first
Answer: A. Highest rate to lowest The debts are ordered from the highest interest rate to the lowest.
Where should extra debt-payment money go?
A Every account equally
B Only the newest debt
C The smallest balance
D Highest-rate target debt
Answer: D. Highest-rate target debt After minimums, the extra payment goes toward the current highest-rate debt.
What should continue on other debts while targeting one?
A No payment at all
B Only interest payments
C Minimum required payments
D Random extra amounts
Answer: C. Minimum required payments Required minimums should continue on all other accounts while extra payments target one debt.
After the highest-rate debt is paid, what happens to its payment?
A Spend it automatically
B Roll it to next rate
C Stop paying other debts
D Restart the closed account
Answer: B. Roll it to next rate The amount used for the paid-off debt is redirected to the next-highest rate.
How can the total monthly debt budget stay steady?
A Reuse paid-off payment amounts
B Reduce all payments
C Ignore minimums
D Open another loan
Answer: A. Reuse paid-off payment amounts Rolling freed payments forward keeps the planned debt repayment amount consistent.
Which factor determines the avalanche order?
A Outstanding balance alone
B Account opening date
C Minimum payment size
D Interest rate
Answer: D. Interest rate The avalanche order is based on interest rate, not balance size.
How does the snowball method differ?
A Targets newest account first
B Targets largest payment first
C Targets smallest balance first
D Targets highest rate first
Answer: C. Targets smallest balance first The snowball focuses on the smallest balance, while avalanche focuses on the highest rate.
What is a possible avalanche advantage?
A Guaranteed loan forgiveness
B May reduce total interest
C No budgeting required
D Every debt closes immediately
Answer: B. May reduce total interest Paying the most costly debt first may save money over time.
What is a possible avalanche trade-off?
A Progress may feel slower
B Interest always increases
C No balances get paid
D All minimums disappear
Answer: A. Progress may feel slower A large high-rate debt may take time to clear, which can make early progress feel less visible.
Does the highest-rate debt always have the largest balance?
A Yes, always
B Yes, by definition
C No, balances are equal
D No, rates and balances differ
Answer: D. No, rates and balances differ Interest rate and balance are separate debt characteristics.
What does an avalanche plan not do by itself?
A Order debts by rate
B Redirect freed payments
C Erase debt automatically
D Track interest cost
Answer: C. Erase debt automatically The avalanche method is a payment-prioritization strategy, not debt forgiveness.
Before starting, which information should be listed?
A Only creditor logos
B Balances, rates, and minimums
C Only account colors
D Only old payments
Answer: B. Balances, rates, and minimums A useful list includes balance, interest rate, minimum payment, and due date for each debt.
Where can current interest rates be verified?
A Recent creditor statements
B A social media post
C An old estimate
D An unrelated bank offer
Answer: A. Recent creditor statements Recent statements or account disclosures show the rates currently applied.
Why track each debt’s minimum payment?
A Choose the highest rate
B Set a username
C Find the oldest account
D Keep other accounts current
Answer: D. Keep other accounts current Minimum payments help keep non-target accounts current while extra money goes to the target.
Which dates help avoid missed payments?
A Account opening birthdays
B Advertisement release dates
C Due dates for every debt
D Branch holiday dates
Answer: C. Due dates for every debt Tracking due dates supports timely minimum payments and helps avoid charges.
How should an avalanche plan treat minimums?
A Skip them on lower rates
B Pay them on every account
C Pay only the target
D Choose them randomly
Answer: B. Pay them on every account Minimums should continue on all debts, not just the highest-rate target.
If minimums are unaffordable, what is a sensible next step?
A Review budget and contact creditors
B Ignore every creditor
C Open several new accounts
D Stop tracking balances
Answer: A. Review budget and contact creditors A repayment plan should be affordable; contacting creditors may clarify available options.
Why consider severe consequences before following a strict rate order?
A All debts have same impact
B Interest rates never matter
C Small debts cannot be urgent
D Some missed debts risk essentials
Answer: D. Some missed debts risk essentials CFPB guidance recommends considering consequences of nonpayment, such as losing essential services or property.
What should stay current before extra goes to the highest-rate debt?
A Only the target debt
B Only a new loan
C Essential and required payments
D Only a savings transfer
Answer: C. Essential and required payments Cover essential needs and required minimums before making extra target payments.
If two debts have equal rates, what can help choose a target?
A A random account color
B Balance or practical consequence
C The newest advertisement
D A creditor’s logo
Answer: B. Balance or practical consequence A borrower can use balance size, consequences, or a sustainable personal preference as a tie-breaker.
When should extra money be applied in an avalanche plan?
A After required payments
B Before rent and essentials
C Instead of every minimum
D Only after closing accounts
Answer: A. After required payments Extra payments come after budgeting for essentials and required minimums.
What can reduce the interest cost of a high-rate balance?
A Skip all other minimums
B Open another account
C Ignore due dates
D Pay more toward principal
Answer: D. Pay more toward principal Reducing principal on a costly balance can reduce future interest, subject to the account terms.
If interest rates change, what should happen to the debt order?
A Keep the old order forever
B Ignore new statements
C Recheck current rates
D Add an account automatically
Answer: C. Recheck current rates An avalanche order should use current rates, especially when rates are variable or promotional.
Why review a promotional rate’s expiration?
A The account automatically closes
B Rate may increase afterward
C Principal is forgiven
D Minimum payments stop
Answer: B. Rate may increase afterward A promotional rate may change when its stated period ends, which can change the payoff order.
Which account may move up the avalanche list after a rate reset?
A Debt with newly highest rate
B Debt with oldest opening date
C Debt with smallest payment
D Debt with newest statement
Answer: A. Debt with newly highest rate The target should reflect the current highest interest rate after a reset.
Can the lowest-balance debt be first under avalanche?
A Always, regardless of rate
B Never under any condition
C Only when it is newest
D If it has highest rate
Answer: D. If it has highest rate The avalanche method prioritizes rate; a small balance comes first only when its rate is also highest.
How does paying a high-rate debt first affect cost?
A It erases every loan
B It guarantees a higher score
C It may lower total interest
D It removes all fees
Answer: C. It may lower total interest Reducing the most expensive balance first may lower total interest compared with delaying it.
Can avalanche guarantee the lowest possible total cost?
A Yes, in every case
B No, terms still matter
C Yes, fees disappear
D No, it cannot repay debt
Answer: B. No, terms still matter Fees, rates, payment timing, and changing balances affect results, so compare the complete terms.
Which calculation method is useful before choosing a strategy?
A Compare projected interest costs
B Compare account colors
C Compare creditor logos
D Compare statement fonts
Answer: A. Compare projected interest costs Estimate how interest may accumulate under each plan using current balances, rates, and payments.
What can make the avalanche target less obvious?
A Fixed due dates
B Account nicknames
C Printed statement colors
D Variable or promotional rates
Answer: D. Variable or promotional rates Rates that change over time can require more frequent review of the target order.
Why record every extra payment?
A Change the benchmark rate
B Set a new due date
C Confirm principal was reduced
D Erase the credit report
Answer: C. Confirm principal was reduced Payment records help verify how creditors applied the extra amount.
What should be checked if an extra payment is misapplied?
A A product advertisement
B Creditor account statement
C The lender’s logo
D A different account
Answer: B. Creditor account statement The statement can show whether the extra payment reduced the intended balance.
How can an avalanche build motivation?
A Track interest-cost progress
B Ignore the debt totals
C Change targets every day
D Stop measuring payments
Answer: A. Track interest-cost progress Tracking balances and interest costs can make gradual progress more visible.
What is a realistic way to set an extra payment?
A Borrow more to pay it
B Skip essential costs
C Assume future income
D Use sustainable budget surplus
Answer: D. Use sustainable budget surplus Extra payments should come from money the borrower can sustain after essentials and minimums.
Why leave room for essential expenses?
A Increase creditor charges
B Change the credit score
C Avoid new missed obligations
D Remove all due dates
Answer: C. Avoid new missed obligations A plan that crowds out essentials may become difficult to maintain.
What may happen if new borrowing continues during payoff?
A Every balance disappears
B Progress can slow
C Interest is canceled
D The avalanche doubles
Answer: B. Progress can slow New debt can offset repayment and make the plan harder to complete.
Which item should be checked before paying extra on a loan?
A How extra payments are applied
B Only the creditor’s logo
C Only account nickname
D Only statement color
Answer: A. How extra payments are applied Confirm whether extra money reduces principal and whether charges or conditions apply.
Can an avalanche plan work without a complete debt list?
A Yes, rates are irrelevant
B Yes, balances are unnecessary
C No, payments are impossible
D It is harder to track
Answer: D. It is harder to track A complete list is needed to compare rates and track each balance.
When should the avalanche order be reviewed?
A Only after every debt closes
B Never during repayment
C When balances or terms change
D Whenever a logo changes
Answer: C. When balances or terms change New payments, rates, or fees can change the order and should prompt a review.
What can an emergency buffer help prevent?
A All interest charges
B New borrowing after shocks
C Every due date
D Credit reporting
Answer: B. New borrowing after shocks A reserve may help handle unexpected expenses without taking on more debt.
What does a debt payoff tracker usually record?
A Balances, rates, and payments
B Only creditor logos
C Only account colors
D Only branch locations
Answer: A. Balances, rates, and payments A tracker records balances, rates, minimums, due dates, and payments.
How should a collection notice be handled?
A Ignore every notice
B Send money to a caller
C Delete the debt list
D Verify and address it promptly
Answer: D. Verify and address it promptly Check the notice against account records and use verified creditor channels.
Which measure best shows avalanche progress?
A Number of new loans
B Number of ads received
C High-rate balances declining
D Number of changed passwords
Answer: C. High-rate balances declining Watching costly balances decline can show progress toward reducing interest exposure.
What should be considered if a small debt has severe consequences?
A Rate order can never change
B Its urgency may take priority
C Only account age matters
D Avalanche forbids exceptions
Answer: B. Its urgency may take priority Repayment priorities can be adjusted when missing a payment threatens essential services or property.
Can the avalanche target change during a plan?
A Yes, review current rates
B No, it is legally fixed
C Yes, but all debts close
D No, rates never change
Answer: A. Yes, review current rates The order can change as rates, balances, and circumstances change.
How can a borrower make an avalanche plan easier to follow?
A Ignore creditor notices
B Skip account statements
C Change the order daily
D Automate reminders and track
Answer: D. Automate reminders and track Reminders and a current tracker support consistent payments and timely reviews.
Which plan best reflects the avalanche method?
A Smallest balance, then next
B Newest account, then next
C Highest rate, then next
D Largest payment, then next
Answer: C. Highest rate, then next The core sequence is to pay the highest-rate debt first and then target the next-highest.
What is the final check before committing to an avalanche plan?
A Only the highest rate
B Affordability and consequences
C Only a slogan
D Only the first payment
Answer: B. Affordability and consequences Choose a sustainable plan that respects essential expenses, minimums, and consequences of falling behind.
What should a borrower do when extra-payment capacity changes?
A Recalculate sustainable amount
B Skip required minimums
C Borrow more automatically
D Ignore essential costs
Answer: A. Recalculate sustainable amount Reassess the budget and set an extra payment that remains affordable after essentials and required minimums.