Debt Terms Word Search
Find 10 essential debt vocabulary terms. Click any word to understand APR, debt payoff strategies, and how to manage debt effectively.
Personal Finance Term
Find 10 essential debt vocabulary terms. Click any word to understand APR, debt payoff strategies, and how to manage debt effectively.
Study these terms before or after solving the puzzle. Each definition includes a real-world US example.
Debt is money borrowed with an agreement to repay with interest. Common forms include mortgages, student loans, and credit cards. High-interest debt can trap borrowers in difficult repayment cycles.
The average American household carries about $104,000 in total debt. Managing it efficiently can save tens of thousands in interest over a lifetime.
The principal is the original amount borrowed. Early loan payments mostly cover interest; later payments shift toward reducing principal. This process is called amortization.
On a $300,000 mortgage at 7%, the first payment of ~$1,996 might be $1,750 interest and only $246 principal. By year 28, most goes to principal.
Interest is the cost of borrowing money. High-interest debt (credit cards at 20%+) can be financially devastating if balances are not paid in full each month.
A $5,000 credit card at 24% APR costs $1,200/year in interest. Paying only minimums could take 15+ years and cost $7,000+ in interest.
Annual Percentage Rate is the yearly cost of borrowing including interest and fees. Always compare APRs when shopping for loans — they reveal the true cost of borrowing.
A 19.99% APR credit card costs ~$200/year per $1,000 balance. A payday loan at 400% APR on the same amount costs ~$4,000 — a massive difference.
The minimum payment is the smallest monthly amount avoiding penalty. Paying only minimums on high-interest debt is financially destructive — most covers just interest.
A $10,000 credit card at 22% APR paying only minimums takes 30+ years and costs $17,000+ in interest. Paying $500/month clears it in 2 years.
Debt consolidation combines multiple debts into a single loan at a lower rate, simplifying repayment and reducing total interest paid.
Consolidating $20,000 in credit card debt at 22% into a personal loan at 10% saves approximately $5,000-8,000 in interest over the repayment period.
The debt avalanche pays highest-rate debts first while making minimums on others. This is mathematically optimal, minimizing total interest paid.
With a 24% credit card, 18% personal loan, and 7% student loan, avalanche attacks the credit card first — saving the most in interest.
The debt snowball pays smallest balances first for psychological momentum. Early wins motivate continued debt payoff, even if not the lowest-rate approach.
With debts of $500, $3,000, and $12,000, the snowball eliminates the $500 balance first — providing motivation to tackle the larger debts.
Secured debt is backed by collateral the lender can seize if you default. Mortgages and car loans are secured. Lower rates reflect lower lender risk from having collateral.
A mortgage at 7% is far cheaper than an unsecured personal loan at 12-15% for the same amount, because the lender can foreclose if you default.
Default occurs when a borrower fails to make payments for an extended period. It triggers credit score damage, collections, wage garnishment, and asset seizure.
Student loan default triggers collection fees up to 18%, and the government can garnish wages and seize tax refunds without going to court.