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Set your targets, then hit them!

It’s a race to see how fast you can shed that debt.

Especially the
high-interest stuff.

How much are you carrying?

The first step is to check how much debt you have, and what sort it is. The high-interest debt costing you the most is the priority, not the no- or low-interest stuff. Student loans, mortgages, or any other loans that don’t charge high interest or fees are okay for now.

It’s the high-interest debt that hurts most: payday loans, credit cards, store cards, car loans. That’s what we’re after first.

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Which one's first?

 

If you have a number of loans to repay, it works best if you focus on repaying a single debt. Keeping the rest at the minimum payment, aim all your extra money to get rid of one at a time.

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Snowball

Pay off the smallest balance first

 

WHYTicking off the tiny ones first gives you momentum, motivation. Quick wins are satisfying. 


 

WHY NOTFinancially speaking, this isn’t the quickest or cheapest way out of debt, but it may fire you up to finish.

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Avalanche

Pay off the highest interest rate first

 

WHY Knocking off the debt that costs you most is the quickest and cheapest way out of debt.



WHY NOT Taking on a large balance first takes tenacity. You want to make sure you make it all the way to being debt-free. 

WHAT IS
THE SNOWBALL?

Paying off our smallest debts first can really get us going. This is called a debt snowball, and it can be truly useful if you need quick feedback that you’re on a roll.
Get the smallest loan out of the way. Then take your repayments (and any extra money you can find) and aim them at the next-smallest debt, and keep going. You gain momentum, pick up speed like a snowball, get all the motivation you need to see it through.

WHAT IS
THE AVALANCHE?

The quickest way out of debt is often called an avalanche: taking down the debts in order of how much they’re costing us. Start with the one that hurts most: the one with the highest interest rate and fees. Then take your repayments (and any extra money you can find) and aim them at the next-highest-interest debt, and keep going. Rinse and repeat until you’ve knocked them off and they all come down in an avalanche.

Get debt on your side

Debt should be a helpful tool. It can be used as leverage to get us climbing (i.e. borrowing to study, to start a business, to buy a property). But most of us end up just using it to smooth out our payments and spend our future money now. And every time we do, it costs us, slowing us down from getting ahead.

Debt needs to work for us!

What about debt consolidation?

Wrapping all our debts together and paying them off at once – ideally at a lower interest rate so we get out faster  – can be helpful. But it can take longer to be rid of it. The key is to leave borrowing behind!

PROS

Rolling many debts into one single loan with a lower interest rate can often save us serious dosh. The weight becomes lighter in the short term because we're paying less interest on only one debt. Whew.

 

VS

 

CONS

Consolidation can lead us deeper into debt. Many times it just frees up more credit card space, so we wind up using that credit and borrow even more.

The end goal has to be becoming debt-free. Wouldn’t it be amazing?

Tick your boxes

It's so satisfying. You can track your progress using your dashboard – add a task to your checklist, or set a goal with the amount you're aiming for.

Feeling stuck?

Flick us a question at [email protected], or reach out
to MoneyTalks on 0800 345 123 for personalised help.

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