Getting Out of Debt

If you're struggling with debt, you're not alone. Millions of people are burdened by debt, and it can be difficult to know where to start to get out of it. This chapter will teach you about different debt repayment strategies and how to avoid common debt traps.

Different debt repayment strategies

There are two main debt repayment strategies. These are the snowball method and the avalanche method.

• Snowball method: With the snowball method, you focus on paying off your smallest debts first, regardless of interest rate. This method can help you to build momentum and stay motivated, as you'll see yourself paying off debts quickly.

• Avalanche method: With the avalanche method, you focus on paying off your highest interest rate debts first. This method can save you money on interest in the long run, but it can be more difficult to stick to, as you may not see yourself paying off debts as quickly.

Which debt repayment strategy is right for you depends on your individual circumstances. If you're struggling to stay motivated, the snowball method may be a good choice for you. If you want to save money on interest, the avalanche method may be a better choice.

How to avoid common debt traps

Here are some tips on how to avoid common debt traps:

• Don't use credit cards to pay for living expenses. Credit cards should only be used for short-term expenses that you can afford to pay off in full each month. If you're using credit cards to pay for living expenses, you're likely to rack up a lot of debt.

• Don't co-sign on loans for friends or family members. If the person you co-signed for defaults on the loan, you will be responsible for the debt.

• Be careful with payday loans and other high-interest loans. These loans can be very difficult to pay off, and they can quickly trap you in a cycle of debt.

• Don't max out your credit cards. It's important to keep your credit utilization ratio low. This means that your total credit card debt should be less than 30% of your total available credit.

If you're struggling to get out of debt, there are a number of resources available to you. You can talk to a credit counsellor/advisor, debt settlement company, or bankruptcy solicitor. There are also a number of government programs that can help you to get out of debt.

Getting out of debt takes time and effort, but it is possible. By following the tips in this chapter, you can start to get out of debt and build a better financial future for yourself.