Debt can feel like a heavy weight, but not all debt is created equal. Understanding the difference between “good” and “bad” debt, and having a plan to tackle it, is essential for financial freedom. At AdviseNow, we help Kiwis manage their debt smarter.
Good Debt vs Bad Debt
Generally, “good” debt is an investment in your future, like a mortgage or a student loan. “Bad” debt is high-interest debt used for things that lose value, like credit cards or car loans. The goal is to eliminate bad debt as quickly as possible.
The Snowball vs The Avalanche
There are two main ways to pay down debt. The ‘Snowball’ method focuses on paying off the smallest debts first for quick wins. The ‘Avalanche’ method focuses on the debt with the highest interest rate first to save the most money. Both work—the best one is the one you’ll stick to!
Key Takeaways
- Prioritise paying off high-interest ‘bad’ debt.
- Choose a repayment strategy that fits your personality.
- Avoid taking on new debt while paying off the old.
Disclaimer: This information is general in nature and does not constitute personalised financial advice.
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