Muhammad Adam bin Ali
Juggling a credit card, a personal loan and a phone instalment? Paying a little everywhere makes debt feel endless. These two strategies give you a clear plan.
The basics for both
- List every debt (balance, interest rate, minimum payment).
- Keep paying the minimum on all of them.
- Decide how much extra you can put towards debt each month (for example, from the 20% part of your budget).
Snowball
Put the extra money on the debt with the smallest balance. Once it’s cleared, roll that payment into the next smallest. Quick wins keep you motivated, but you may pay more interest overall.
- Advantage: A quick victory provides motivation.
- Disadvantage: may pay more in interest overall.
Avalanche
Put the extra money on the debt with the highest interest rate. You save the most interest and usually finish sooner, but the first win can take a while.
- Advantages: saves the most benefits and is usually completed more quickly.
- Disadvantage: the first debt may take a long time to resolve.
Using the same example
| Debt | Balance | Annual interest |
|---|---|---|
| Phone installment | RM1,200 | 0% (easy installment) |
| Personal loan | RM8,000 | 9% |
| Credit card | RM4,000 | 18% |
Snowball pays phone → card → loan; avalanche pays card → loan → phone.
Which one?
If you lose motivation easily, choose snowball. If you’re disciplined and want to save the most, choose avalanche. The best method is the one you stick with.
If even minimums are hard
Talk to your lenders, or get free counselling from AKPK.
Key takeaways
- Pay all minimums.
- Snowball = smallest balance first, avalanche = highest rate first.
