Managing Debt Wisely
Lesson 3 of 4 in Money Foundations · 9 min read
Not all debt is equal. Understanding the difference helps you borrow with intent.
Good debt vs costly debt
A home loan or an education loan can build long-term value. Credit card balances and many personal loans carry high interest and rarely build anything lasting.
The cost of revolving credit
Credit card interest in India often exceeds 3% per month. Paying only the minimum due can keep you in debt for years.
Repayment strategies
- Avalanche: pay off the highest-interest debt first; this saves the most money.
- Snowball: clear the smallest balance first for a motivational win.
A healthy limit
Many planners suggest keeping total EMIs below roughly 30 to 40% of take-home income, so that savings and emergencies are not squeezed.
Key takeaways
- Separate productive debt from expensive consumer debt
- Clear high-interest credit card balances first
- Keep total EMIs within a comfortable share of income