Question 1

What is the difference between debt snowball and avalanche methods?

Accepted Answer

The debt snowball method pays off debts from smallest balance to largest, providing quick psychological wins that keep you motivated. The debt avalanche method targets the highest interest rate debts first, minimizing total interest paid over time. Avalanche saves more money mathematically, but snowball has higher success rates due to the motivational boost of clearing debts quickly.

Question 2

How does extra payment help in debt payoff?

Accepted Answer

Extra payments beyond minimum payments are applied to the target debt (smallest balance in snowball, highest rate in avalanche). As each debt is paid off, its minimum payment amount 'rolls over' to the next target debt, creating a snowball effect. Even a small extra payment of ₹2,000-5,000 per month can shave years off your debt payoff timeline and save significant interest.

Question 3

Which debt should I pay off first?

Accepted Answer

If you want to save the most money, pay off the debt with the highest interest rate first (avalanche method). Credit card debts at 36-42% should almost always be prioritized. If you need motivation from quick wins, start with the smallest balance (snowball method). Use this calculator to compare both approaches for your specific debts.

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