Indialends, 13 Oct 2025

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How to pay off your loans easily: Debt Snowball and Debt Avalanche Method

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Loans provide a financial cushion when you’re in times of need. Loans are an easy and immediate way of getting your financial needs met. But if you’re not making your payments on time, you may have too many accumulated outstanding payments.

In such situations, adopting effective strategies can make a significant difference in your financial portfolio. In this blog, we will explore two popular debt repayment methods, the Debt Snowball and the Debt Avalanche, along with practical examples to help you choose the strategy that best suits your financial situation.

Debt Snowball Method:

The Debt Snowball method involves paying off the smallest debts first, regardless of interest rates, while making minimum payments on larger debts. As each small debt is paid off, the freed-up funds are then redirected towards the next smallest debt, creating a snowball effect.

Example:

Suppose you have the following debts:

Credit Card A: ₹5,000 (Minimum Payment: ₹200, Interest Rate: 18%)

Personal Loan: ₹15,000 (Minimum Payment: ₹500, Interest Rate: 12%)

Car Loan: ₹50,000 (Minimum Payment: ₹1,000, Interest Rate: 8%)

Using the Debt Snowball method, you would first focus on paying off Credit Card A. Once it's paid off, you redirect the ₹200 towards the personal loan, and so on. The sense of accomplishment with each debt cleared can motivate you to stay on track.

Debt Avalanche Method:

The Debt Avalanche method involves paying off outstanding payments with the highest interest rates first, regardless of the loan amount. This strategy minimises the total interest paid over time, saving you money.

Example:

Considering the same debts as in the previous example, you would prioritize paying off credit card A, then the personal loan, and then the car loan. By first tackling the debts with the highest interest rates, you save money on interest payments in the long run.

Choosing Between Debt Snowball and Debt Avalanche:

The choice between these methods depends on your financial personality and goals. If you value quick wins and psychological victories, the Debt Snowball method may be more suitable. On the other hand, if you prioritize minimizing interest payments and are motivated by long-term savings, the Debt Avalanche method might be the better choice.

Paying off loans requires commitment, discipline, and a well-thought-out strategy. Whether you choose the Debt Snowball, Debt Avalanche method, or a combination of both, staying consistent and focused on your financial goals is key. Adopting these strategies and making informed financial decisions can pave the way towards a financially secure future.