Is the burden of many loans on your head? Snowball and Avalanche Method will get you rid of them quickly, know what they are..

Nowadays, loans have become a part of our lives. Whether it is buying a car, house, or shopping, we get many options from credit cards, personal loans, and home loans to car loans, through which we can easily arrange money. But sometimes we take many loans at once. Everything seems fine in the beginning, but when many EMIs have to be paid at once, it feels like a big burden. It seems as if we are trapped in 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 the loan - Snowball and Avalanche. Let us 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 paid off first, then the next smallest loan is repaid. This process continues until all your loans are paid off.

How does it work?

Make a list

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

Make minimum payments
Just like Snowball, here too 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 on.
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, adopt the same strategy for the next loan as well.

Which method is better for you?
Which method you should choose to repay the loan, it completely depends on you. 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 loan as soon as possible, then you can choose Avalanche method. This method saves you a lot of money on interest in the long run. Mathematically, this is the fastest way to get rid of debt quickly.

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