Without question, the best advice for reducing debt is not to take on new, unnecessary debt. To eliminate your existing debts across your various accounts, there are broadly three recommended approaches.
Regardless of which one you deem as most appropriate for you, the first step is to list all your debts and compare them across the following factors: outstanding balance, minimum monthly instalment, interest rate charged and age (when last you paid each debt). Before even going into the different approaches, the following rules are important:
Rule 1: Do not get into more unnecessary debt.
Rule 2: Keep all your accounts up to date by paying the minimum instalment on each one.
Rule 3: Draw up an accelerated debt repayment plan and stick to it until you pay off all accounts.
Your debt-reduction plan should include using any excess cash to pay off your debts according to one of the following methods:
Method 1: List the debts by interest rate charged (from highest interest rate to lowest) and pay them off in that order. The benefit of this approach is that it is the quickest way to wipe out your total debt balance because it directly reduces the overall interest that you pay on your overall debt. This allows you to get to the debt-free finish line much quicker than the other options.