Smart Debt Management
Managing multiple loans starts with seeing them all in one place. Once you know each balance, rate, and minimum payment, the right strategy usually becomes obvious.
Sample Debt List
| Debt | Balance | Rate | Min. Payment |
|---|---|---|---|
| Credit card | ₹80,000 | 40% p.a. | ₹4,000 |
| Personal loan | ₹2,00,000 | 14% p.a. | ₹8,500 |
| Car loan | ₹3,50,000 | 9% p.a. | ₹10,200 |
Here, avalanche order is credit card → personal loan → car loan — attacking the 40% card first saves the most interest overall, even though its balance isn't the largest.
Check Your DTI Ratio First
Debt-to-Income (DTI) is your total monthly debt payments divided by monthly income. For the debts above (₹4,000 + ₹8,500 + ₹10,200 = ₹22,700/month) against a ₹70,000 income:
DTI = ₹22,700 ÷ ₹70,000 = 32% — generally considered manageable; lenders start getting cautious above ~40%–50%.
Building Your Plan
- List every debt with balance, rate, and minimum payment — you can't prioritize what you haven't written down.
- Avalanche: pay minimums everywhere, put every extra rupee toward the highest-rate debt. Minimizes total interest paid.
- Snowball: pay off the smallest balance first for quick psychological wins, even if it's not the highest rate.
- Consider consolidation only if the new loan's effective rate (including fees) genuinely beats your current blended rate.
- Keep a small emergency buffer running alongside repayment — going to zero savings to pay debt faster often backfires.