What describes an effective approach to reducing debt?

• A. Pay only minimum payments on all debts to avoid risk.
• B. Create a repayment plan, prioritize high-interest debt (avalanche) or smallest balance (snowball), and avoid new debt.
• C. Consolidate all debts into one loan at a higher rate.
• D. Ignore debt and wait for it to disappear.

Answer: (B)

The main idea is to handle debt with a plan that reduces what you owe faster rather than simply paying what you can each month. Start by listing every debt with its balance and interest rate, then pick a payoff method: the avalanche approach targets the highest-interest debt first to minimize total interest, while the snowball approach pays off the smallest balance first to build quick momentum. Either way, keep making minimum payments on all debts and direct any extra money toward the chosen target. As each debt is paid off, roll that payment amount to the next one. The crucial part is avoiding new debt while you’re paying down existing balances, so progress isn’t undone.

This approach works because it combines a clear, data-driven plan with disciplined payments, which reduces the total interest you pay and speeds up the payoff. Paying only minimums prolongs debt and increases interest; consolidating into a single loan at a higher rate can just raise overall cost; and ignoring the problem guarantees debt will persist.