By BillCut
Last updated: 3 November 2026
To pay off multiple loans faster, list every loan, pay the minimum on all of them, and send every spare rupee to one loan at a time. Which loan you pick first changes how much interest you pay and how motivated you stay. This guide explains the steps, the two common orders, the prepayment rules from RBI, and a worked example.
Step 1: What do you owe right now?
Write down each loan with its balance, interest rate, EMI and due date. Include credit card balances, personal loans and any app loans. Seeing the full picture often shows that a few loans cause most of the cost. If you are not sure what is open in your name, review your credit report. CIBIL lists a credit report option for individuals and a dispute option for errors.
Step 2: How much extra can you pay each month?
Add up your EMIs, then check your income and basic costs. Whatever is left after safe spending is your extra amount. Even a small, steady amount helps. If there is nothing left, the answer is not a harder plan but a lower cost one, which is covered in step 5. Our post on fixing debt overload may help here.
Step 3: Avalanche or snowball?
Both methods start the same way. You keep paying the minimum on every loan. Then you send the extra amount to one target loan. When it closes, its EMI is added to the next target.
| Method | Which loan first | Main benefit | Main drawback |
|---|---|---|---|
| Avalanche | Highest interest rate | Lowest total interest | First win may take longer |
| Snowball | Smallest balance | Quick early wins | Usually costs more interest |
Avalanche suits borrowers who are comfortable with numbers. Snowball suits those who need early progress to stay on track. Both beat paying only the minimums.
A worked example (illustrative)
All figures below are illustrative, calculated in Python with monthly interest. They are not a quote.
| Loan | Balance | Rate a year | Monthly payment |
|---|---|---|---|
| A | Rs 1,00,000 | 24 percent | Rs 3,000 |
| B | Rs 2,00,000 | 16 percent | Rs 6,000 |
| C | Rs 50,000 | 12 percent | Rs 2,000 |
Assume you can add Rs 3,000 a month on top of these payments, and each freed up payment rolls to the next loan. Here is what the model shows.
| Plan | Months to clear all | Total interest (illustrative) |
|---|---|---|
| Minimum payments only | 56 | Rs 1,40,539 |
| Snowball (C, then A, then B) | 39 | Rs 1,02,268 |
| Avalanche (A, then B, then C) | 36 | Rs 88,794 |
In this made up case, avalanche saves about Rs 13,474 of interest over snowball. Real results depend on your actual rates, fees and any charges.
Step 4: What do RBI rules say about prepayment?
Check the cost of closing a loan early before you send extra money. RBI’s Pre-payment Charges on Loans Directions, 2025 apply to commercial banks, co-operative banks, NBFCs and All India Financial Institutions. For loans sanctioned or renewed on or after 1 January 2026, no pre-payment charges apply on floating rate loans to individuals for non-business purposes. This applies to part or full prepayment, from any source of funds, with no minimum lock-in period.
For other loans, any charge follows the lender’s policy. Whether charges apply must be stated in the sanction letter and loan agreement, and charges not disclosed that way cannot be levied. Read the full text on the RBI directions page. For older loans, check your agreement. Our post on early loan prepayment charges adds detail.
Step 5: Is consolidation an option?
If your loans have high rates, one new loan at a lower rate may reduce cost and track fewer due dates. It only helps if the new rate, fees and tenure work out better in total. A longer tenure can cut the EMI and still raise the interest. Compare the full cost, including any closure charges on old loans. Our post on how to stop juggling multiple loans covers this route.
Check your options with BillCut
Step 6: What if a lender is unfair or pushes too hard?
RBI’s Fair Practices Code for NBFCs says lenders should not harass borrowers, for example by calling at odd hours. It also says that if a complaint is not resolved within one month, a customer may approach the relevant RBI regional office. Read the code on the RBI site. You can also raise a grievance with the National Consumer Helpline through consumerhelpline.gov.in.
How BillCut can help
BillCut is a balance transfer and debt reduction platform. It works with lending partners to help eligible borrowers move high interest dues, such as credit card balances and personal loan EMIs, into one structured EMI. BillCut earns from helping borrowers refinance, so it has an interest in this option. Approval and terms depend on the partner lender. A payoff plan on your own, as above, is also a valid choice.
Frequently asked questions
Which loan should I pay off first?
With avalanche, the loan with the highest rate. With snowball, the one with the smallest balance. Pick the one you can follow.
Is avalanche always cheaper?
It usually costs less interest, as the illustrative example shows. The gap depends on your rates and balances.
Can I prepay without a penalty?
Under RBI directions, no prepayment charges apply on floating rate loans to individuals for non-business purposes sanctioned or renewed from 1 January 2026. Other loans follow the lender’s disclosed policy.
Should I prepay or save the extra money?
Keep a small emergency fund first. Then compare the loan rate with what you can safely earn elsewhere.
Will closing loans early change my credit report?
Closed accounts will show as closed once the lender reports it. Check your report for errors after closing a loan.
Does consolidation always help?
No. It helps only if the total cost, including fees, is lower, or if it gives you a plan you can keep.
Where can I complain if a lender breaks the rules?
Start with the lender’s grievance officer. You can also file a grievance with the National Consumer Helpline at consumerhelpline.gov.in.
Disclaimer: This article is for general information. It is not legal, tax or financial advice. Examples are illustrative and not offers. Check current rules on official RBI pages and with your lender before deciding.
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