Have Rs 8L in mixed debt across personal loans and credit cards. Should I clear the biggest or smallest first?

The most mathematically efficient way to build your net worth back up is the avalanche method. You list all your loans and sort them by the highest interest rate. Credit cards usually charge the highest rates.

You focus all your extra Rs 25k capital on paying off that highest-interest loan first. While doing this, you just make the minimum required payments on the rest of your loans. Once that most expensive debt is completely cleared, you move your extra capital to the next highest interest rate loan.

However, personal finance is often much more about psychology than pure math. If the avalanche method feels overwhelming because your highest-interest loan is also your largest balance, you should pivot to the snowball method. With the snowball method, you find the absolute smallest loan balance you have and pay it off completely.

Getting rid of that one loan gives you a massive psychological win and a real sense of achievement. That momentum motivates you to tackle the next smallest loan. You keep building this momentum until you are entirely debt-free.

Lenders make their highest profits when your loan never truly ends. They use nudges like automatic credit limit upgrades to keep you borrowing. Whether you choose the math of the avalanche or the psychology of the snowball, the key is to pick one method and stick to it relentlessly.

Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.