What is the debt snowball method?
Method:
List out all your debts by balance from smallest to largest, regardless of interest rate
Work out your budget to make minimum payments on all of them
With your remaining budget pay off the debt with the smallest balance first
Once the smallest is paid off, then take the next smallest and so on
What is the debt avalanche method?
Method:
List all your debts by interest rate from largest to smallest, regardless of the balance
Work out your budget to make minimum payments on all of them
With your remaining budget pay off the debt with the highest interest rate first
Once the one with the highest interest rate is paid off, then take the next highest and so on
How do I get out of debt
Firstly, not all debt is bad, and in fact it can be a useful financial tool. The difference between good and bad debt is whether the debt is worth getting yourself into; and whether it benefits you in the long term. If there is a specific reason for taking on the debt and a clear affordable plan to pay it back, it is more likely to be classed as good. For example, over the long term it is likely to be beneficial to take out a mortgage, student loan or invest in your business using a loan.