Debt can feel overwhelming, especially when you’re juggling multiple loans or credit card balances. To regain control, financial experts often recommend two popular repayment strategies: the Debt Snowball and the Debt Avalanche.
While both help you clear debt systematically, their effectiveness depends on your financial situation and mindset. Let’s explore how each method works and which one fits best for borrowers in India.
1. What is the Debt Snowball Method?
The Debt Snowball method focuses on clearing the smallest debt first, regardless of interest rate. Once the smallest debt is repaid, you roll over that payment amount into the next-smallest debt, creating a “snowball effect.”
✅ Advantages:
Quick wins that motivate you to stay consistent
Builds repayment discipline
Helps those who need psychological boosts to stay on track
❌ Disadvantages:
You may end up paying more interest in the long run if high-interest debts are left for later
Best For: Borrowers who struggle with motivation and need small victories to stay committed.
2. What is the Debt Avalanche Method?
The Debt Avalanche method focuses on repaying the highest-interest debt first while making minimum payments on others. Once the costliest debt is gone, you redirect payments toward the next highest interest debt.
✅ Advantages:
Saves money on interest payments
Helps you get debt-free faster overall
Mathematically efficient strategy
❌ Disadvantages:
Progress feels slower since high-interest debts are usually larger
May test your patience without immediate results
Best For: Borrowers disciplined enough to focus on long-term savings over quick wins.
3. Debt Repayment in the Indian Context
In India, borrowers commonly deal with personal loans, credit cards, education loans, gold loans, and home loans. With interest rates varying widely (credit cards at 30–40% p.a., personal loans at 10–18% p.a., home loans at 8–9% p.a.), the strategy you choose makes a big difference.
If you carry high-interest credit card debt, the Debt Avalanche method is financially smarter.
If you’re juggling many smaller EMIs and feel stressed, the Debt Snowball may provide the motivation you need.
4. Which Method Works Best in India?
Choose Debt Snowball If: You need emotional wins to keep going, have multiple small loans, and want to reduce the number of EMIs quickly.
Choose Debt Avalanche If: You want to save the maximum money in interest, are financially disciplined, and can wait longer to see results.
Expert Tip: A hybrid approach often works best—clear one or two small loans with Snowball for motivation, then switch to Avalanche to minimize interest costs.
FAQs:
Q1. Which is more popular in India – Snowball or Avalanche?
Many Indian borrowers prefer the Snowball method for quick relief, but financially, the Avalanche method saves more in interest.
Q2. Can these strategies work for home loans?
Yes, but since home loans have lower interest rates, Avalanche is less impactful. Snowballing smaller personal loans or credit card debt first is better.
Q3. How can I track my debt repayment progress?
Use financial apps, Excel sheets, or simply set EMI reminders to track payments and reduce missed deadlines.
Q4. Is debt consolidation better than these methods?
Debt consolidation works if you can secure a loan at a lower interest rate. Otherwise, Snowball and Avalanche are safer strategies.
Q5. What’s the fastest way to get debt-free in India?
Combine extra repayments, avoid new debt, and use either Snowball or Avalanche consistently.
Published on : 1st October
Published by : SMITA
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