Living a debt-free life is nothing short of sweet, but achieving it is not a walk in the park. We live in a world where debt has become part of us- from car loans to mortgages and student loans, not forgetting the menace that’s mobile lending platforms in Kenya.

But the reality is that most of us are drowning in debts, especially debts from mobile lenders that are quick to access and come with an exorbitant interest rate, with some having an APR (Annual Percentage Rate) as high as 100%+. I have realized that most individuals in this situation borrow to repay one debt and borrow again to meet their daily household expenses. It is a never-ending debt cycle that soon spirals out of control.   

I believe we should all aim for a debt-free life in the long run. Whatever debts you accumulate along the way, because sometimes borrowing is a necessary evil, you should work towards getting out of it as soon as possible and channel your funds towards savings or investments.

Read more about Student Loan Debt Payment and Management

There are two common debt pay off strategies you can employ:

The Debt Snowball Method

This method settles debt by dedicating excess funds to the smallest debts first. To get the excess funds, compile a monthly budget, and have a rough idea of how much you need to pay your bills – from rent to food and other necessary payments like insurance. Whatever funds you have left after paying your bills, that’s the excess funds.

Related: Best Budgeting Apps

The next step involves making a list of all the debts you owe from the smallest to the largest outstanding balance. This does not constitute interest for the debts. Make the maximum payments to the smallest debt with other outstanding loans receiving only the minimum amount. Once you have fully repaid the smallest loan, you move to the next- make maximum payments for this and minimum payments for the remaining ones. 

See the below example:

Debt Balance Interest Rate (APR)
Student Loan Ksh. 120,000.00 5.5%
Personal Loan Ksh. 56,000.00 12%
Mobile Money Loan Ksh. 20,000 22%

Using the debt Snowball pay off method, you will use the below strategy:

  1. Pay the minimum balance for all three loans from the excess funds.
  2. Whatever money is remaining (assuming you are not saving anything), channel it to clearing the debt with the lowest balance, i.e., the mobile money loan of Ksh. 20,000.00.
  3. When the mobile money is fully paid, focus on clearing the next lowest balance, which is the personal loan of Ksh. 56,000.00. 
  4. The last step is clearing the last loan on your list, the student loan.

The crown on the jewel with this approach is that it’s easy to quickly pay off debts as you are motivated by clearing off the small debts. It follows a snowball analogy: as it rolls down, it keeps growing to a bigger snowball.

The debt snowball strategy is ideal for anyone who needs motivation along the way or has multiple small debts you need to pay off. Unfortunately, this method tends to be expensive when you have loans with high-interest rates. Remember, this strategy does not factor in the loan’s interest rate, and the longer you hold a loan with high interest, the more you wind up paying. 

The Debt Avalanche Method

Unlike the debt snowball method, the avalanche strategy clears off the debt with higher interest rates first, and you work your way towards debts with lower APR. Again, make a list of all the debts you have but this time, focus on the interest rate part and not the loan balance. After making the minimum payments for all the loans, channel the remaining funds towards the loan with the highest APR.

This method is quite useful as it looks into the enormous benefits of getting rid of high-interest rates. Once you repay the expensive debt, the excess funds are allotted to the remaining balances, accelerating the payments further. 

Using the below example:

Debt Balance Interest Rate (APR)
Student Loan Ksh. 120,000.00 5.5%
Personal Loan Ksh. 20,000.00 12%
Mobile Money Loan Ksh. 50,000 22%

Ignore the fact that the personal loan has the lowest balance and focus on the mobile money loan with the highest APR. So 

  1. Pay the minimum balance for all three loans.
  2. Use the remaining funds to pay off the loan with the highest APR, i.e., the mobile money loan with 22%.
  3. After the mobile money loan is cleared, channel the funds to clearing the personal loan with an APR of 12%.
  4. The last loan to clear will be the student loan with an APR of 5.5%. 

This method will save you money by focusing on clearing debts with high-interest rates as soon as possible. It also gives you some satisfaction when these debts are off your list, even if it takes time. Unfortunately, it might take a bit longer to see any progress on your debt pay off, especially when the high-interest loans also have high balances. If you are looking for motivation from the small wins, the debt avalanche methods might not suit you. 

Other strategies to consider include:

The Fireball Method

It is a debt pay off strategy from financial advisors at SoFi, an online, American based personal finance company. It is a hybrid of both the snowball and the avalanche strategies. 

The rationale behind this is to pay off undesirable debts faster, leaving the somewhat desirable debts for future payments.

First, make a classification of debts into two broad categories; bad and good debts. Bad debts involve debts that have interest rates of more than 7%. These are major dips in your pockets and reduce your net worth significantly. Good debts have interest rates that are lower than 7%. 

Because most debts here have an APR that’s more than 7%, I would recommend classifying the good and the bad debts as secured and unsecured. Most secured debts have a low APR and lower repayment amounts, while unsecured debts, like credit cards and debts from mobile lending platforms, are unsecured and have higher interest rates. 

The prime focus is on bad debts, where you list them from the lowest to the largest balances. After making the minimum payments on all debts, channel your excess funds to the bad debts starting with the smallest outstanding balance, and work your way to the bad debts with high balances. 

Once you have paid off all the bad debts, you can use your excess funds to meet some financial goals, like saving to buy an asset or start a business, or building an emergency fund, rather than applying it to paying off the good loans. The convention is to do away with all the bad debts first then move onto the good list while saving or investing for our future. 

Related: Building an Emergency Fund and Why It’s Important

Debt Consolidation 

If you have multiple loans from one or several lenders, you can consolidate these into one loan. For example, if you have an auto loan, credit card debt, and a student loan, your lender can make this into one loan. You will get a lump sum amount from lender A to pay off these three loans, even if they are from different creditors. After this, you will have only one loan from lender A.

Debt consolidation will leave you with a new APR, loan term, and minimum repayment amount. You will also have a new loan balance, higher or lower than the total amount of all the consolidated loans if you wish to increase or reduce the loans’ total amount.

With several loans to keep tabs on, debt consolidation will make it easy for you to track your debts. It can also lower your APR and monthly payment amount, especially if you have high credit card debts and consolidate this into a personal loan. The downside of this could be the costly fees that come with debt consolidation, like the balance transfer fees and the loan origination fees.


There is no conventional method in debt repayment. One can choose from the strategies mentioned above based on their current finances, overall preferences, and credit scores. The success of any strategy will also depend on your motivation to be debt-free. Whichever approach fits, your primary focus should be being debt-free and only borrow money when it is necessary.

Related: 5 Important Things To Consider Before Taking A Loan



  • Paul Githirwa Kungu

    November 17, 2020

    Nice read, will try the snowball method. Tala, branch and mshwari loans must be cleared.


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