Avalanche vs Snowball vs Hybrid — personalised debt payoff plan with interest savings and the verdict: pay off first or invest?
| Strategy | How It Works | Best For |
|---|---|---|
| ❄️ Avalanche | Pay minimum on all, extra on highest-APR debt first (CC → PL → HL) | Mathematically optimal |
| ⛄ Snowball | Pay minimum on all, extra on smallest-balance debt first (quick wins) | Psychological motivation |
| 🔀 Hybrid | Clear small balances first (momentum), then switch to avalanche for remaining debt | Most people in practice |
High-cost debt is the single biggest wealth destroyer for Indian middle-class households. Credit card debt at 36–42% APR is more financially damaging than any market crash. The Avalanche method (highest APR first) saves the most interest. The Snowball method (smallest balance first) builds psychological momentum.
Depends on the interest rate. For debt above 15% APR: pay it off first, aggressively. For debt below 10% (home loan): invest the surplus. For debt between 10–15%: hybrid — clear debt and invest small SIP simultaneously.
At current home loan rates of 8.5–9.5%, the tax-adjusted effective cost is 6–7% (after 24b deduction). If you can earn 12%+ in equity, investing beats prepayment. But prepayment gives guaranteed return equal to loan rate — useful for risk-averse investors.