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Several loans at once: which one to pay off first

6 min read
Woman going through her bills with a calculator and laptop

Short answer: First, make sure you pay the minimum on every loan, every month. Missing one costs more than any plan can save. Then put any extra money on one loan at a time. Paying the highest interest rate first usually saves the most money. Paying the smallest balance first gives you quicker wins. Either way, you will do far better than if you spread extra money thinly or pay only the minimums.

The situation

Sana, 32, a teacher in Jaipur, has three repayments:

Loan Balance Interest rate Minimum per month
Credit card ₹40,000 42% a year (3.5% a month) + 18% GST (tax) on interest ₹2,000
Personal loan ₹1,20,000 16% a year ₹4,200
Fridge bought on EMI (fixed monthly payments) ₹12,000 0% ₹2,000

Her minimums add up to ₹8,200. She goes through her budget and finds ₹3,000 extra a month. So she can put ₹11,200 a month towards debt.

Step 1: Draw your debt map

Write every debt in one place: who you owe, the balance, the interest rate, the minimum, the due date and any penalty for paying late or early. Include money you owe to family and to BNPL (“buy now, pay later”) apps. Many people find a loan they had forgotten. Others find a due date that doesn’t match their payday.

Don’t know a loan’s interest rate? Look in its Key Facts Statement (KFS, a short sheet that sums up the loan’s costs), the loan agreement or the app. Without the rates, nobody can tell you which order is cheapest.

Step 2: Choose a way to use the extra money

Way 1: Highest rate first (sometimes called “avalanche”) Pay the minimum on everything. Put all the extra money on the loan with the highest interest rate. When it’s paid off, move that money to the loan with the next-highest rate.

Way 2: Smallest balance first (sometimes called “snowball”) Pay the minimum on everything, then put all the extra money on the smallest balance. You clear a loan quickly and free up its payment for the next one. Many people find that seeing this progress helps them keep going.

Sana’s results

We ran both approaches on Sana’s numbers, keeping her total at ₹11,200 a month:

Debt-free in Total interest paid
Minimums only (₹8,200/month in total) 27 months ₹48,384
Smallest balance first (₹11,200/month) 19 months ₹29,733
Highest rate first (₹11,200/month) 18 months ₹28,524

Fictional example; figures rounded. Assumes minimums stay fixed, interest is charged monthly, no new spending on the card, and no late or prepayment fees. Real cards calculate interest and minimums in different ways. When a loan is paid off, its minimum moves to the next loan.

Look at the gap. The two plans are close to each other. The big difference is between having a plan with extra money and paying only the minimums: both plans save Sana about ₹19,000 and 8–9 months.

Things that can change the answer

  • Prepayment charges. Some loans charge you for paying early. Check the KFS or agreement before you send extra money.
  • Secured loans. A gold loan or vehicle loan is backed by something you own. If you miss payments you can lose it, so keep this loan up to date even if its rate is lower.
  • Interest-free periods ending. A 0% EMI may start charging if you miss a payment.
  • New borrowing. Neither plan works if you keep using the credit card. Think about putting it away for now.
  • Emergency money. Keep a little cash aside, so one surprise bill doesn’t push you back onto the card.

If you can’t cover the minimums

Then a payoff plan isn’t the first step. Protect your basic needs (food, rent, medicines) and list exactly what you can pay. Contact your lenders before you miss a payment, and read Your next EMI doesn’t fit your budget. A new high-cost loan to pay an old one usually makes the hole deeper.

What to check today

  1. Write your debt map: every loan, balance, rate, minimum and due date.
  2. Find any loan where you don’t know the interest rate, and look it up in the KFS or app.
  3. Work out how much extra you can pay each month, even ₹500, without skipping essentials.

Try it with your own numbers

→ Debt map and payoff planner: add your loans and compare “highest rate first” with “smallest balance first”, month by month.

Sources and review

  • Calculations by Paisavy on fictional data. Script and assumptions are available in the calculation notes.
  • 18% GST applies to credit card interest and fees. Check your card statement for the exact charges.
Try it with your numbers
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Educational information, not financial advice. Found an error? Tell us → · Corrections log

Frequently asked questions

Which loan should I pay off first if I have many loans?

First, pay the minimum on every loan, every month. Missing one payment costs more than any plan can save. Then put your extra money on one loan at a time. Paying the highest interest rate first usually saves the most money. Paying the smallest balance first gives you quicker wins. Either way, you will do far better than paying only the minimums.

What is the avalanche method vs the snowball method?

Both are ways to use extra money after you pay all the minimums. Avalanche means you pay the loan with the highest interest rate first. Snowball means you clear the smallest balance first. In our fictional example, avalanche cost ₹28,524 in interest and snowball ₹29,733. The bigger gap was against paying minimums only: both plans saved about ₹19,000.

Should I pay off my credit card before my personal loan?

Usually yes, if the card charges the higher rate. In our example the card charges 42% a year plus 18% GST (tax) on interest, and the personal loan 16%. Check your own rates first. Keep secured loans, like a gold loan or vehicle loan, up to date even if their rate is lower. If you miss them, you can lose the gold or the vehicle.

How do I find the interest rate on my loan?

Look in the loan's Key Facts Statement (KFS, a short sheet that sums up the loan's costs). You can also check the loan agreement or the lender's app. Write every rate into one list, with the balance, minimum and due date. Without the rates, nobody can tell you which order is cheapest. See How to read a KFS.

Should I take a new loan to pay off my old loans?

A new high-cost loan to pay an old one usually makes the hole deeper. If you can't cover your minimums, a payoff plan isn't the first step. Protect your basic needs (food, rent, medicines) and list exactly what you can pay. Then contact your lenders before you miss a payment. Our Hard to pay page walks you through it.

Do I pay a charge if I pay extra on a loan?

Some loans charge you for paying early. Check the KFS or loan agreement before you send extra money. Count any charge when you choose which loan to pay first. Certain floating-rate loans to individuals have no prepayment charge at all. Paying off a loan early explains which ones.