When you have a credit card balance, a consumer loan and a personal loan, the question is not just how much to pay but where to put every extra rupee. Two methods answer that.
The two methods
- Both: pay the minimum on every debt, every month, so nothing goes overdue.
- Avalanche: put all extra money on the debt with the highest interest rate.
- Snowball: put all extra money on the debt with the smallest balance, to close accounts quickly.
Same debts, both methods
Credit card ₹1.5 lakh at 42% a year, consumer loan ₹40,000 at 16%, personal loan ₹3 lakh at 14%. Total budget ₹30,000 a month.
| Method | Paid first | Debt-free in | Interest paid |
|---|---|---|---|
| Avalanche | Credit card (42%) | 20 months | ≈ ₹84,000 |
| Snowball | Consumer loan (smallest) | 20 months | ≈ ₹89,500 |
Avalanche saves about ₹5,500 here. The gap grows when the high-rate debt is also large, or when the budget is tight and payoff takes years.
Which one to pick
Avalanche is always cheaper on paper. Snowball wins if closing an account quickly keeps you motivated and stops you from giving up. The best method is the one you follow every month until the end.
Credit cards first, almost always
Card interest of 36–45% a year is so much higher than other debt that clearing it first usually beats any other move, including investing.
Ways to speed it up
- Move card balances to a cheaper personal loan or balance transfer, then close the loop by not adding new spends.
- Put bonuses and tax refunds straight into the target debt.
- Keep a small emergency fund so a surprise bill does not go back on the card.
- Pause new SIP increases until high-interest debt is cleared; do not stop insurance premiums.
Calculators for this guide
Finkoin tip
List your loans and cards and see the payoff order, months and interest for both methods.
Try it on Finkoin →FAQs
Clear answers in plain language. Educational guidance only.