What are the financial benefits of paying off high-interest debt first?

Paying off high-interest debt first, often called the avalanche method, is one of the smartest strategies for getting your finances back on track in India in 2025. When you focus on clearing your most expensive debts—like credit cards or payday loans—you end up saving a substantial amount on interest over time. This approach means you pay the minimum on all your debts but throw any extra money at the one with the highest interest rate. Once that’s cleared, you move on to the next highest, and so on.

The main benefit is that you reduce the total interest paid, which helps you become debt-free faster. As each high-interest balance is cleared, you can redirect those payments towards your next debt, speeding up the process. This method is especially effective in India, where unsecured loans and credit cards often carry much higher rates than secured loans. By lowering your overall debt and reducing your credit utilisation, you also give your credit score a healthy boost. A stronger credit score usually opens the door to better loan terms and lower rates in the future.

Other benefits are less financial stress and improved cash flow. With fewer debts eating into your monthly income, you’ll have more money to save or invest. This disciplined approach not only helps you get out of debt but also puts you in a stronger position to attain your financial goals and build long-term stability.