Pay off your personal loan or credit card first

pay off your personal loan or credit card first

It is usually better to pay off your credit card first before your personal loan. Credit cards typically have higher interest rates, and paying off credit card debt first may help you save money. But the best repayment strategy depends on your unique financial situation.

Unfortunately, 36% of Americans have more debt than emergency savings.1 If you are struggling with personal debt, you may be looking for ways to pay it down. Should you pay off your personal loan or credit card first? These are common questions if you’re struggling with debt. And CreditNinja is here to help you answer them. 

There are a couple of different strategies for paying off debt. If used, they could help you save time and money in the long run. Read on to learn more about these debt-paying strategies!

Which Debts to Pay off First: Personal Loan or Credit Card

Many Americans have several different forms of debt. For example, they may have credit cards, auto loans, personal installment loans, and bad credit loans. Learning best practices for paying these off is a good idea if you’re trying to improve your credit score. 

So should you pay off your personal loan or credit card first? According to money expert Dave Ramsey, a good rule of thumb is to pay off your debts with the lowest balances first. At the same time, you should be making minimum payments on the larger or higher-interest debts.2

But this isn’t the only strategy for paying down your debt. This is one of two main strategies that many people use to organize and pay their debts. This is the debt snowball method, and the other is called the debt avalanche. 

Debt Snowball vs. Debt Avalanche

While there are different strategies for paying off debt, we should mention that no matter which strategy works for you, the important thing is to make payments. But having a bit of know-how and planning behind those payments will definitely help. 

The debt snowball, as mentioned above, is one of these strategies. Using the debt snowball means paying off your debts in order of smallest to largest, no matter what the interest rates may be. Continue to make minimum payments on your other accounts, while making large payments on the smallest. Once that one is paid off, you move to the next until all of your accounts are paid. 

The debt avalanche, on the other hand, focuses on paying off the debt with the highest interest rate first, then moving on to the next highest after that. But the problem with this method is that you may get discouraged if it takes a long time to pay off this first debt. According to Ramsey, the key to paying off your debt is motivation and this is where the snowball method shines.2

Getting an early win in your repayment journey will motivate you to keep going. You can’t underestimate the power of motivation with your finances. Seeing one of your debts disappear could be the kick you need to continue paying them off. 

While it’s not bad to pay off a credit card early, keep in mind that some installment loans have prepayment penalties. For example, suppose you got washer and dryer financing for bad credit. If you speed up repayment, your lender may charge a penalty fee. Ensure there are no fees before you start making additional payments. 

A Word From CreditNinja on Whether To Pay off Loan or Credit Card First

There are different strategies available to pay off credit card debt and personal loans. But the best strategy depends on your repayment preferences, debt amount, and income. But keep in mind that debt consolidation may make debt repayment easier. 

Check out the CreditNinja Dojo to learn how to add a beneficiary to a bank account, how to rent a home with bad credit, and more!


  1. How to save money and pay off loans simultaneously │ CNBC
  2. Debt Snowball vs. Debt Avalanche │ Ramsey
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