Educational information, not individual financial advice.
Debt is not inherently bad. A mortgage that lets you buy a home you'll live in for 30 years at a fixed 3% rate, with tax-deductible interest, is often a reasonable financial tool. A revolving credit card balance at 23% APR is not. The difference is rate, purpose, and how the debt fits into the rest of your plan.
| Category | Value | Share |
|---|---|---|
| Mortgage (30y fixed) | 10% | |
| Auto loan (new) | 12% | |
| Federal student | 10% | |
| HELOC | 14% | |
| Personal loan | 19% | |
| Credit card | 36% |
Rate and purpose matter far more than whether 'debt' is good or bad. A 3% mortgage and a 23% credit card aren't the same tool.
This section covers how debt actually works (what your payment is buying, how amortization splits interest from principal), the two main strategies for paying down multiple debts, and the specific considerations for the two largest debt categories most households carry: mortgages and student loans.
How debt works — the mechanics of interest, APR vs APY, amortization schedules.
Payoff strategies — when to pay down debt faster vs invest the same money, and how to sequence multiple debts.
Mortgages — fixed vs ARM, PMI, points, equity, refinancing.
Student loans — federal vs private, income-driven repayment, loan forgiveness programs.
If you have multiple debts and are unsure where to direct extra payments, start with "Debt Payoff Strategies." If you're considering paying off low-rate debt early instead of investing, read "When to Pay Down vs Invest." If you're about to take on a mortgage, read "Mortgages" and "Amortization Explained" first.
Liabilities in Horizons are modeled with rate, balance, and term. The engine calculates monthly payments, splits interest from principal, tracks remaining balance, and applies the payoff strategy you choose (avalanche or snowball) when extra cash is available. Linked expenses (mortgage P&I, student loan payment, car payment) automatically end when the liability is paid off.
You have $500/month of surplus cash plus three debts: a 3% mortgage, a 7% car loan, and a 23% credit card balance. Your employer offers a 100% 401(k) match on your first 3% of pay. Where should the surplus go first?