2 Loan repayment method

The Debt Snowball

This method has more focus on psychology rather than on financial aspects.

Step 1: Prepare a list of all loans outstanding

Step 2: Arrange these loans in order from lowest to highest o/s balance

Step 3: Roll the snowball slowly. Start paying the debt from the lowest to the highest amount outstanding

By doing this, no. of loans will be reduced speedily. This will give mental peace.

The Debt Avalanche

Step 1: Prepare a list of all loans with interest rates.

Step 2: Arrange this loan in order of highest to lowest interest rates

Step 3: Make minimum payment for all loans and use the remaining money to pay debt with the highest interest rate

Both the methods work. It depends on your situation and behaviour which is best for you.

You should take advantage of both methods and combine them as per your benefit.

Prepare a list of the loan with outstanding balances along with interest rates. Do some permutation and combination and find out what should be your strategy for repayment.

Credit card payment should be your priority. After that, personal loan or car loan. Housing loans should be the last priority.