If you have several debts, the order in which you repay them affects both the interest you pay and your motivation. Two popular methods are the avalanche and the snowball.
Key takeaways
- Avalanche: pay extra on the highest-interest debt first — saves the most money.
- Snowball: pay extra on the smallest balance first — builds momentum.
- In both, pay the minimum on all other debts.
- Credit-card debt usually comes first because of very high interest.
Example debts
| Debt | Balance | Interest | Minimum |
|---|---|---|---|
| Credit card | ₹60,000 | 42% | ₹3,000 |
| Personal loan | ₹2,00,000 | 14% | ₹6,900 |
| Consumer loan | ₹20,000 | 18% | ₹2,000 |
Monthly budget for debt: ₹18,000 → extra ₹6,100 beyond minimums.
- Avalanche order: credit card → consumer loan → personal loan.
- Snowball order: consumer loan → credit card → personal loan.
Avalanche saves more interest; snowball clears the first debt faster.
Speed-ups
- Balance transfer or personal loan to replace card debt at a lower rate — stop using the card.
- Negotiate with lenders for EMI plans.
- Put bonuses and tax refunds into debt.
- Cut one or two big expense categories temporarily.
Avoid
- Taking new debt while repaying.
- Using retirement savings (EPF/PPF) unless it is an emergency.
- "Debt settlement" unless unavoidable — it damages your credit report.
Your action checklist
- Write down monthly essential expenses and EMIs.
- Automate savings on salary day before spending.
- Keep an emergency fund in liquid, safe options.
- List debts with interest rates and choose a repayment order.
- Review your budget and goals every quarter.
FAQs
Which method is better?
Mathematically avalanche; behaviourally, snowball can help you stick to the plan. Pick the one you will follow.
Should I invest or repay debt?
Repay debts costing more than your expected post-tax investment return first.
