{"id":22646,"date":"2025-10-20T00:13:38","date_gmt":"2025-10-19T22:13:38","guid":{"rendered":"https:\/\/moneyhub.ee\/?p=22646"},"modified":"2025-10-20T10:25:03","modified_gmt":"2025-10-20T08:25:03","slug":"credit-card-or-loan-debt-first","status":"publish","type":"post","link":"https:\/\/moneyhub.ee\/en\/useful\/articles\/credit-card-or-loan-debt-first\/","title":{"rendered":"Should I pay off credit card or loan debt first?"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"22646\" class=\"elementor elementor-22646\" data-elementor-post-type=\"post\">\n\t\t\t\t<div class=\"elementor-element elementor-element-5d7efb58 e-flex e-con-boxed e-con e-parent\" data-id=\"5d7efb58\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-32d40bf6 elementor-widget elementor-widget-shortcode\" data-id=\"32d40bf6\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"shortcode.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<div class=\"elementor-shortcode\"><nav aria-label=\"breadcrumbs\" class=\"rank-math-breadcrumb\"><p><\/p><\/nav><\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-1e4750ba e-flex e-con-boxed e-con e-parent\" data-id=\"1e4750ba\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t<div class=\"elementor-element elementor-element-a047e75 ddddf e-flex e-con-boxed e-con e-child\" data-id=\"a047e75\" data-element_type=\"container\" data-e-type=\"container\" data-settings=\"{&quot;background_background&quot;:&quot;classic&quot;}\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-20c9d99a elementor-widget elementor-widget-heading\" data-id=\"20c9d99a\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Discover practical strategies to manage and reduce loan debt for a healthier financial future. Take control today\u2014read the article for valuable tips!<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-18b94166 e-flex e-con-boxed e-con e-parent\" data-id=\"18b94166\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-13e8adb2 elementor-widget elementor-widget-image\" data-id=\"13e8adb2\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img fetchpriority=\"high\" decoding=\"async\" width=\"800\" height=\"450\" src=\"https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first.jpg\" class=\"attachment-full size-full wp-image-22648\" alt=\"Should I pay off credit card or loan debt first?\" srcset=\"https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first.jpg 800w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first-300x169.jpg 300w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first-1024x576.jpg 1024w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first-768x432.jpg 768w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first-1536x864.jpg 1536w, https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first-2048x1152.jpg 2048w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-19d502c4 e-flex e-con-boxed e-con e-parent\" data-id=\"19d502c4\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-175f64b5 elementor-widget elementor-widget-text-editor\" data-id=\"175f64b5\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<h1><b>Should I pay off credit card or loan debt first?<\/b><\/h1><p><span style=\"font-weight: 400;\">Let your interest rates guide you when deciding in which order to pay down debt. That usually means sending any extra money toward credit card debt first, then private (personal)<\/span><a href=\"https:\/\/moneyhub.ee\/en\/useful\/articles\/loans-guide\/\"> <span style=\"font-weight: 400;\">loans<\/span><\/a><span style=\"font-weight: 400;\">, student loans, car loans and, lastly, your<\/span><a href=\"https:\/\/moneyhub.ee\/en\/money\/mortgages\/\"> <span style=\"font-weight: 400;\">mortgage<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p><p><span style=\"font-weight: 400;\">Generally, it\u2019s best to pay off credit card debt first, followed by loan debt, as credit cards often have the highest interest rates, or APRs. The annual percentage rate (APR) represents the total yearly cost of borrowing, encompassing interest, fees, and other charges, making it a crucial factor for comparing the actual cost of different debt products.<\/span><\/p><p><span style=\"font-weight: 400;\">When you prioritise paying off credit card debt, you\u2019ll not only save money on interest, but you\u2019ll potentially improve your credit too. That\u2019s because reducing credit card debt directly impacts your credit utilisation, one of the most significant contributing factors to credit scores.<\/span><\/p><p><span style=\"font-weight: 400;\">Here\u2019s your guide to eliminating credit card and loan debt one by one.<\/span><\/p><h2><b>How to decide which debt to pay off first<\/b><\/h2><p><span style=\"font-weight: 400;\">Start by sending extra money to the debt with the highest interest rate or APR. That way, you&#8217;ll begin cutting down on the principal balance of your debt, and you&#8217;ll pay interest on a reduced amount.<\/span><\/p><p><span style=\"font-weight: 400;\">Typically\u2014though not always\u2014<\/span><a href=\"https:\/\/moneyhub.ee\/en\/money\/credit-cards\/\"><span style=\"font-weight: 400;\">interest rates on credit cards<\/span><\/a><span style=\"font-weight: 400;\"> are higher than on loans. The average credit card APR as of the <\/span><a href=\"https:\/\/statistika.eestipank.ee\/#\/en\/p\/889\/r\/4712\/4461\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">second quarter of 2025 is around 18%<\/span><\/a><span style=\"font-weight: 400;\">; yours may be higher or lower, depending on your personal credit profile at the time of application. In contrast, the average personal loan interest rate <\/span><span style=\"font-weight: 400;\">was <\/span><a href=\"https:\/\/statistika.eestipank.ee\/#\/en\/p\/889\/r\/4712\/4461\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">16.67%, but for non-bank creditors (i.e. fast loan operators) it was 25.29%<\/span><\/a><span style=\"font-weight: 400;\">,<\/span><span style=\"font-weight: 400;\"> on a 24-month loan. However, personal loan rates can reach as high as 50%, depending on your credit score, the type of loan, and other factors.<\/span><\/p><p><span style=\"font-weight: 400;\">There&#8217;s one exception to this rule: If you have a<\/span><a href=\"https:\/\/moneyhub.ee\/en\/useful\/articles\/quick-loan\/\"> <span style=\"font-weight: 400;\">fast loan<\/span><\/a><span style=\"font-weight: 400;\">, it&#8217;s crucial to prioritise paying that off first, even before credit cards. Fees associated with these loans, along with their short-term nature, can result in costs equivalent to an <\/span><a href=\"https:\/\/staging.claudiuslaw.com\/et\/oigusblogi\/volaoigus-lepingud-blogi\/claudius-oigusbueroo-volasuhted-ja-intressid\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">APR that exceeds the original loan amount<\/span><\/a><span style=\"font-weight: 400;\">. Get these out of the way before turning your attention to other debts.<\/span><\/p><h2><b>Benefits of Paying Off Credit Card Debt First<\/b><\/h2><p><span style=\"font-weight: 400;\">Here&#8217;s why it often makes the most sense to return credit card debt as your first step:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Less interest to pay off:<\/b><span style=\"font-weight: 400;\"> The longer you hold credit card debt, the more interest you&#8217;ll pay. Plus, unless you&#8217;re actively paying down your balance, you could be paying interest charges on interest that&#8217;s already accrued. By paying off credit cards first, you prevent high-interest charges from accumulating over time.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Reduced temptation to spend:<\/b><span style=\"font-weight: 400;\"> Paying off a credit card and taking it out of your regular financial rotation will mean you&#8217;re less likely to build up debt again. It&#8217;s usually better for your credit to avoid cancelling credit<\/span><a href=\"https:\/\/moneyhub.ee\/en\/useful\/articles\/filing-business-accounts-financial-statement\/\"> <span style=\"font-weight: 400;\">accounts<\/span><\/a><span style=\"font-weight: 400;\">. However, it may make sense to use the card only sparingly, such as for a single subscription payment, and plan not to add charges to it in the future.<\/span><\/li><\/ul><h2><b>How to pay off debt<\/b><\/h2><p><span style=\"font-weight: 400;\">If you have several credit cards and loans, first make a list of your current balances, APRs, minimum monthly payments or instalment payments, and due dates for each payment. That will help you determine how to start your payoff journey. Here are a few paths you can take:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Debt avalanche method:<\/b><span style=\"font-weight: 400;\"> The most cost-saving payoff method is to target the credit card with the highest APR first, also known as the <\/span><a href=\"https:\/\/moneyhub.ee\/en\/useful\/articles\/debt-avalanche-method\/#:~:text=The%20debt%20avalanche%20method%20is,total%20interest%20paid%20over%20time.\"><span style=\"font-weight: 400;\">debt avalanche method<\/span><\/a><span style=\"font-weight: 400;\">. Using this strategy, you pay as much as you can on the highest-rate credit card or loan while you pay the minimum on the rest of your debts. Once you pay off the first account, you\u2019ll move to the one with the next-highest rate and use the same strategy until all your accounts are paid off. This method helps you repay your debts faster and reduce the total amount paid in interest.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Debt snowball method:<\/b><span style=\"font-weight: 400;\"> You may prefer to pay off small balances first, a technique known as the <\/span><a href=\"https:\/\/moneyhub.ee\/en\/useful\/articles\/debt-snowball-strategy\/\"><span style=\"font-weight: 400;\">debt snowball method<\/span><\/a><span style=\"font-weight: 400;\">. Doing so won\u2019t save you as much money as paying off debts with the highest APRs first, but it can be effective if getting a series of small wins\u2014by paying off accounts more quickly\u2014encourages you to continue attacking debt. This approach can be a suitable solution for those who need motivation from quick wins.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Loan refinancing:<\/b><span style=\"font-weight: 400;\"> Another option available to those with good or excellent credit is refinancing their mortgage. That\u2019s when another financial institution pays off your prior loan or loans and issues you a new one at a lower interest rate. You can refinance a car loan, a mortgage or a student loan, and you\u2019ll ideally refinance when interest rates are low to take advantage of the potential savings. If you then also pay off the loan quickly, you\u2019ll save even more in interest compared to your original loan. You can refinance a consumer loan, unsecured loan, or<\/span><a href=\"https:\/\/moneyhub.ee\/en\/money\/short-term-loans\/\"> <span style=\"font-weight: 400;\">small loan<\/span><\/a><span style=\"font-weight: 400;\">, and the new agreement will specify the loan amount, repayment period, and other terms.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Debt consolidation loan:<\/b><span style=\"font-weight: 400;\"> Similar to a balance transfer credit card, a<\/span><a href=\"https:\/\/moneyhub.ee\/en\/useful\/articles\/debt-consolidation\/\"> <span style=\"font-weight: 400;\">debt consolidation loan<\/span><\/a><span style=\"font-weight: 400;\"> allows you to roll multiple debts into a single personal loan with a fixed monthly payment. It\u2019s used for repayment of instalment loans instead of credit cards. For debt consolidation to work, the interest rate you qualify for must be lower than the average rate of your current debts, so it\u2019s most likely to pay off if you have good credit. These loans are often used to consolidate consumer loans and can help manage monthly repayments more easily.<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">Common uses for consumer loans and small loans include covering unexpected expenses, purchasing household appliances, dental treatment, or durable goods. Some credit cards offer purchase insurance for bigger purchases, protecting your items. Additionally, some credit cards include<\/span><a href=\"https:\/\/moneyhub.ee\/en\/insurance\/travel-insurance\/\"> <span style=\"font-weight: 400;\">travel insurance<\/span><\/a><span style=\"font-weight: 400;\"> and legal assistance insurance as extra benefits.<\/span><\/p><p><span style=\"font-weight: 400;\">To qualify for a consumer loan or credit line, you typically need to show regular income and complete an agreement with the bank. You can manage your loan or credit card through your internet banking using your bank account or current account. Secure authentication methods, such as an ID card, Mobile ID, or Smart ID, are often required.<\/span><\/p><p><span style=\"font-weight: 400;\">You can repay the loan early, and once it is fully repaid, your financial obligation is settled.<\/span><\/p><h2><b>Which loans should you pay off first?<\/b><\/h2><p><span style=\"font-weight: 400;\">Similar to the credit card payoff process, the best approach with instalment loans is to focus on loans with the highest interest rates or APRs.<\/span><\/p><h3><b>Private loans<\/b><\/h3><p><span style=\"font-weight: 400;\">With an average APR of 16% on a 24-month loan, personal loans are right in the middle in terms of interest rates; not as high as credit cards, but often higher than other types of loans, such as mortgages. Consider paying down personal loans after you&#8217;ve made progress on your credit cards, but before turning to your other loans.<\/span><\/p><h3><b>Student loans<\/b><\/h3><p><span style=\"font-weight: 400;\">Student loans are effectively private loans provided by banks or online lenders. Private loans are often more costly and come with fewer benefits, such as income-driven repayment plans or payment pauses due to large-scale disasters like the COVID-19 pandemic. For most borrowers, it makes sense to pay off private loans since you have less to lose and more potential money to save in interest.<\/span><\/p><h3><b>Car loan<\/b><\/h3><p><span style=\"font-weight: 400;\">Car loan rates are also private loans. However, your rate may be higher or lower, depending on when you first borrowed, your credit score at the time, and other factors. Compared to a mortgage, a car loan is usually smaller and more manageable to pay off quickly.<\/span><\/p><h3><b>Mortgage<\/b><\/h3><p><span style=\"font-weight: 400;\">Mortgage rates have decreased slightly from their peak late last year, but they remain higher than they&#8217;ve been since 2007. If you bought your home since then, your rate may be low enough that<\/span><a href=\"https:\/\/moneyhub.ee\/en\/useful\/articles\/home-loan-problems-cant-pay-mortgage\/\"> <span style=\"font-weight: 400;\">paying off your mortgage<\/span><\/a><span style=\"font-weight: 400;\"> should be low on your list of priorities for debt repayment. If your rate is higher than current rates\u2014although that&#8217;s very unlikely\u2014you can consider refinancing.<\/span><\/p><p><span style=\"font-weight: 400;\">Also, mortgages tend to be very large, long-term loans of up to 30 years, so paying them off quickly is unrealistic compared to paying off other, smaller instalment loans over a shorter period.<\/span><\/p><h2><b>To sum up<\/b><\/h2><p><span style=\"font-weight: 400;\">The most significant and crucial step is deciding to focus your attention on debt payoff in the first place. Once you&#8217;ve gotten there, keep it simple by focusing on your balances with the highest interest rates first, which will generally be credit cards. The same interest rate strategy applies when you&#8217;re determining the best order in which to pay off your loans.<\/span><\/p><p><span style=\"font-weight: 400;\">Since this approach helps you save money on interest, you&#8217;ll be able to free up cash to put toward other debts\u2014and financial goals even beyond debt paydown. While you work on paying down your debts, be sure to monitor your credit and keep an eye out for the benefits in your credit scores.<\/span><\/p><h1><br \/><br \/><\/h1>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-adf47ca e-flex e-con-boxed e-con e-child\" data-id=\"adf47ca\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Discover practical strategies to manage and reduce loan debt for a healthier financial future. Take control today\u2014read the article for valuable tips!<\/p>\n","protected":false},"author":3,"featured_media":22648,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-22646","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles"],"acf":[],"blog_post_layout_featured_media_urls":{"thumbnail":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first-150x150.jpg",150,150,true],"full":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first.jpg",800,450,false]},"categories_names":{"21":{"name":"Articles","link":"https:\/\/moneyhub.ee\/en\/category\/useful\/articles\/"}},"tags_names":[],"comments_number":"0","rttpg_featured_image_url":{"full":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first.jpg",800,450,false],"landscape":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first.jpg",800,450,false],"portraits":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first.jpg",800,450,false],"thumbnail":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first-150x150.jpg",150,150,true],"medium":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first-300x169.jpg",300,169,true],"large":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first-1024x576.jpg",800,450,true],"1536x1536":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first-1536x864.jpg",1536,864,true],"2048x2048":["https:\/\/moneyhub.ee\/wp-content\/uploads\/2025\/10\/credit-or-loan-debt-first-2048x1152.jpg",2048,1152,true]},"rttpg_author":{"display_name":"David Bailey","author_link":"https:\/\/moneyhub.ee\/en\/author\/davidbailey\/"},"rttpg_comment":0,"rttpg_category":"<a href=\"https:\/\/moneyhub.ee\/en\/category\/useful\/articles\/\" rel=\"category tag\">Articles<\/a>","rttpg_excerpt":"Discover practical strategies to manage and reduce loan debt for a healthier financial future. Take control today\u2014read the article for valuable tips!","_links":{"self":[{"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/posts\/22646","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/comments?post=22646"}],"version-history":[{"count":11,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/posts\/22646\/revisions"}],"predecessor-version":[{"id":22815,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/posts\/22646\/revisions\/22815"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/media\/22648"}],"wp:attachment":[{"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/media?parent=22646"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/categories?post=22646"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/moneyhub.ee\/en\/wp-json\/wp\/v2\/tags?post=22646"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}