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Nowadays, loans have become a part of our life. Whether it is to buy a car, buy a house or do shopping, we get many options from credit card, personal loan, home loan to car loan, through which we can easily arrange money. But many times we take many loans at once. In the beginning everything seems fine, but when many EMIs have to be paid together, it feels like a big burden. It seems as if we are trapped in such a debt trap, from which it is difficult to get out. If you are also in a similar situation, then do not panic. There are two very effective and worldwide adopted methods of repaying debt - Snowball and Avalanche. Let's understand them in very simple language.

What is the Snowball Method?

The Snowball Method is a loan repayment strategy in which the smallest loan is repaid first, then the next smallest loan is repaid. This process continues until all your loans are repaid.

How does it work?

Make a list

First of all, make a list of all your loans and write them in order from smallest to largest according to the amount of the loan. Write the smallest loan at the top, then the bigger one, then the bigger one and finally write the amount of the largest loan. Understand with an example- Suppose you have 3 loans, credit card loan ₹10,000, student loan ₹50,000 and car loan ₹1,00,000. Now you will put the credit card loan at the top of the list, then the student loan and finally the car loan. After this, one by one, according to the number, you will focus on repaying them as soon as possible.

Make minimum payments

Just like snowball, in this also keep paying the minimum EMI of all the loans on time. But pay maximum attention to the most expensive loan. Invest your extra money in repaying the loan with the highest interest rate, no matter how big its amount is.

Save money and move ahead

When the most expensive loan is over, repay the second most expensive loan. Invest the EMI money of the first loan and whatever extra money you have in the second loan and get rid of it as soon as possible. After this, follow the same strategy for the next loan.

Which method is better for you?

Which method you should choose to repay the loan, it completely depends on you. The snowball method motivates you by eliminating the burden of small loans. On the other hand, if you are disciplined and your only goal is to eliminate the burden of the loan as soon as possible, then you can choose the avalanche method. With this method, you save a lot of money spent on interest in the long run. This is mathematically the fastest way to get rid of the loan quickly.