Several debts: which one should you pay off first?
Pay the minimum on everything, then put every spare dong into ONE debt. The only question is which one.
Short answer
Paying the highest-rate debt first (the "avalanche") costs the least interest. Paying the smallest balance first (the "snowball") wipes out a debt sooner and keeps motivation up. Often both pick the same debt.
This article is for general information, not financial, investment or legal advice. All figures are rounded illustrations; your situation may differ.
An example: three debts
The avalanche pays the consumer loan first (highest rate), then the credit card, then the car loan. The snowball starts with the credit card because its balance is smallest.
Monthly interest on the balance (illustration)
| Debt | Balance | Rate a year | Interest a month |
|---|---|---|---|
| Consumer loan | VND 60 million | 35% | VND 1.75 million |
| Credit card | VND 20 million | 28% | VND 0.47 million |
| Car loan | VND 300 million | 11% | VND 2.75 million |
Watch out for flat-rate loans
Consumer loans often quote a flat rate: interest is charged on the original amount for the whole term, even as the balance falls. The real rate on what you still owe is higher than the contract figure — compare debts on that real rate.
Never let any debt go overdue
Whichever way you choose, pay at least the minimum on every debt on time. Late payments add fees, overdue interest and harm your credit record — costing more than any difference between the two methods.
Work it out for your own situation
In Verdant you enter your own family’s numbers and see the result update right away.