Getting out of debt requires a plan. The two most popular strategies are the Debt Snowball and the Debt Avalanche.
The Debt Snowball
This method focuses on psychological wins. You list your debts from smallest balance to largest balance, regardless of interest rate. You pay off the smallest one first to get a quick victory, then roll that payment into the next smallest.
The Debt Avalanche
This method focuses on mathematical efficiency. You list debts from highest interest rate to lowest. By attacking the highest interest rate first, you save the most money on interest over time.
Debt Consolidation
If you have multiple high-interest debts, you might consider a consolidation loan. This combines all your debts into one single payment, ideally with a lower interest rate. However, this only works if you address the spending habits that got you into debt in the first place.
The Emotional Side
Debt can be shameful and stressful. The best strategy is the one you can stick to. If the quick wins of the Snowball method keep you motivated, that is worth more than the mathematical savings of the Avalanche method.