Strategies to get out of credit card & personal loan debt

Some financial experts say there is two types of debt, “good debt” and “bad debt”.  If that were the case, credit card and personal loan debt would be in the “bad” sort. 

With 2 million Australians in this type of debt, there are a number of reasons that may lead to this.

Experts in this space  recommend two approaches to getting rid of debt… and I have to say, depending on your personality one may work better than the other.

 

Rules for both:

  • Always meet the minimum repayments
  • Only continue using ONE credit card for things (try keep for emergencies only)
  • Your objective is to cut up as many credit cards as possible
  • Make a list of credit cards, how much you owe and the interest rates

Option 1 - pay off the smallest balance first - Do if you get your motivation by frequent (albeit smaller) wins

Option 2 - pay off the highest interest rate first - Do if you are incredibly rational and want the biggest bang for buck

The important thing is to do something!

 

References:

Great article by Moneysmart - https://www.moneysmart.gov.au/media/283411/cant-pay-your-debts.pdf - Provides details on financial counselling and other types of advisory options