Debt management starts with contractual facts and household cash flow. Labels such as “good debt” and “bad debt” can hide differences in rate, fees, collateral, tenure, tax eligibility, and payment risk.
Quick answer
Record each debt's balance, rate, required payment, remaining tenure, security, and prepayment terms. Then compare household debt burden, liquidity, and alternative repayment sequences. No single strategy is appropriate for every borrower.
Measure household debt burden
NiyamFin uses monthly debt payments divided by monthly take-home income. Its planning bands are:
- Below 35%: lower debt burden
- 35–45% inclusive: watch debt burden
- Above 45%: higher debt burden
These are NiyamFin planning bands, not lender approval thresholds, regulatory limits, or universal affordability rules. Lenders may apply their own FOIR or affordability criteria.
Compare repayment sequences
Avalanche prioritizes the highest contractual rate and, all else equal, generally minimizes modeled interest. Snowball prioritizes the smallest balance and may close accounts sooner. Another sequence may reflect liquidity, fees, collateral, or payment-management needs.
Prepayment, refinancing, and consolidation
Prepayment can reduce contractual interest when the lender applies the payment to principal under the loan terms. Compare whether EMI or tenure changes, any charge, and the liquidity left afterward.
Refinancing or consolidation does not erase debt. Compare the new rate, all fees, remaining tenure, collateral, total repayment, and the risk that cleared revolving limits are used again. A lower EMI can still accompany a higher total cost if tenure extends.
Illustrative scenario
Illustrative scenario: two offers have different rates and fees. Compare total payments over the same remaining horizon rather than selecting the offer with the lower advertised rate or EMI alone.
Common mistakes
- Treating a lender's possible sanction amount as a household budget.
- Comparing EMIs while ignoring tenure and total cost.
- Assuming a balance transfer is beneficial without including fees.
- Committing all liquid cash to repayment without reviewing resilience.
What to do next
Use the Debt Rescue Planner to model obligations and the EMI Calculator to inspect a loan schedule. Review contractual documents before changing a loan.