Have multiple loans? Here's how you can be debt-free

I'm paying off home, car, and credit card loans with total monthly EMIs of Rs 40,000. Can you suggest a strategy to help me clear my debts? - Anonymous

Loans consume future income, so eliminate the most financially draining ones first. Start with your credit card loan, as it's typically the most expensive with high interest. Pay it off quickly, even if it requires taking up a part-time job or halting your investments. These loans are only justifiable for emergencies and can severely impact your finances if carried on for the long term.

Once the credit card loan is settled, focus on clearing the car loan next. Vehicles depreciate quickly, so it's best to clear this loan as soon as possible.

Your home loan can be justified as it's tied to a long-term appreciating asset. Home loans usually have lower interest rates and provide tax benefits, so continue paying this at a normal pace.

Also read: Should you prepay your home loan?

This article was originally published on September 30, 2024.