How to get out of debt

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Debt is something that’s rarely discussed, but can be more common than you think. And ignoring it can have an expensive impact on your finances. According to debt charity StepChange, in just six months, one of their clients with a typical range of debts could waste £2,300 on interest charges.

How can I get out of debt?

If have serious worries about debt and you’re struggling to pay it off, contact a debt charity like StepChange or National Debtline. They can help advise you if you’re struggling with debt.

How can I try to be debt free?

Borrowing money isn’t always a bad thing. But if you’re looking at how to be debt free, here's an outline on how you could manage money and pay off debt:

1. Create a budget to plan how much you can pay off

A budget sets out how much money you're expecting to get and how much you're expecting to spend over a specific period of time. It can help you manage your finances and reduce any outgoings so you can try and put more money towards paying off debt.

The general aim of a budget is to see how much you'll have left over, after you've made sure your income covers all your essential outgoings (i.e. stuff that you couldn't live without like your rent, food and energy bills). You can use this leftover money to pay off your debts. 

Budgeting is also a great way to understand your spending habits, and can help you make better financial decisions and spot any issues quicker. Here's a guide on how to create a budget.

2. Pay off your debts in the right order

It can be helpful to pay off your debts in a certain order. Choosing the right order can help you save money, clear debt faster, or just make you feel more motivated. 

It might be important to make sure you can cover the following types of debt first:

Priority debts

These are debts that can get you in serious trouble if you don’t pay – such as losing your home, having your electricity cut off or going to prison. This type of debt may include court fines, council tax, child maintenance, utility bills, mortgage and rent. It may also include debt that’s become urgent (e.g. because you missed lots of payments). You could avoid serious problems by paying this type of debt off first.

Minimum payments

When you borrow money from a company, you normally agree to pay a minimum amount every month. Skipping this payment can lead to fines or the company closing your account and taking legal action against you. So it’s important to meet these payments before clearing other debt.

Once you’ve taken care of priority debts and minimum payments, you can look at ways to prioritise the rest of your debts.

Here are two common methods:

1. Expensive debts first (the ‘avalanche’ method)

Paying off expensive debt first could save you money, meaning you may be able to pay off your debt faster or more easily. You can identify your most expensive debt by looking at the interest rate and fees you’re paying. 

For example, let’s say you owe £500 on a credit card with a 20% interest rate and £1,000 on a loan with a 5% interest rate. Using the avalanche method, you’d aim to pay off the credit card first as it’s more expensive.

2. Small debts first (the ‘snowball’ method)

Some people pay off their debts from the smallest to largest – no matter what these charge in interest and fees. 

This method isn’t cost efficient, but it can suit you if you want  quick wins to motivate you. The idea is that you’ll pay off smaller debts quickly, which will give you the stamina to tackle bigger ones next.

3. Try putting your debt in one place

Debt consolidation or a debt management plan (DMP) is where a company takes over all your debts and writes to the banks that you owe on your behalf, while you pay the company directly in one lump sum each month. Essentially, it works by paying off your old accounts with credit from a new one. 

This could be helpful because you don’t need to worry about paying off your debts in a specific order, as they’re grouped into a single account instead.

When finding a DMP, just make sure you avoid any companies that might charge large fees for their services.

Debt consolidation can also be a useful way to manage payments. And moving debt to an account with a lower interest rate can also save you money.

However, it's important to keep in mind potential drawbacks too. Applying for a new bank account and closing old bank accounts can potentially damage your credit score. Also, even if your consolidation account has a lower rate, you may end up paying more interest overall if you clear the debt more slowly. You should also take other factors like eligibility and setup fees into account.

Consolidate debt with a personal loan

A personal loan is a type of loan that’s unsecured. This means you won’t forfeit your home if you miss payments. You'll normally need to repay a fixed amount monthly until you clear the loan.

Consolidate debt with a balance transfer card 

If the debt you're consolidating is credit card debt, you might consider a 0% balance transfer card. These typically offer a 0% interest rate for a fixed period. Keep in mind that there's usually a setup fee and you can end up with a higher interest rate if you're not debt-free before the 0% period ends.

4. Use savings to pay off overdrafts and credit card debts

It’s usually a good idea to pause saving until you’ve cleared any overdraft and credit card debt you might have. That’s because the interest on your debts is likely to be costing you more than any interest you’re earning on savings. 

Financial agony aunt Laura Whateley advised a Monzo user in debt to stop putting money in a savings account until they’re debt-free. She states that there's not much point putting money in a savings account that's paying 1 or 2% interest, if you’re simultaneously chipping away at an overdraft or a credit card with interest rates of 20% or more. Read more of her tips on dealing with debt here.

5. Try to find extra money See if you can make any extra money to boost your repayments

It isn’t always easy, but if you can, you could try to find some extra money to help you pay off your debts faster.

Use sites like eBay or Depop to sell things you might not be using, or try reclaiming council tax. You can check your council tax band on the government website, to make sure you're in the right one!

6. Get help paying your mortgage

There's a government scheme specifically designed to help mortgage holders who are struggling to make monthly repayments and are in mortgage arrears. The scheme helps you get a loan to cover interest on your mortgage up to certain thresholds. You can read more about it here.

What should you do if it gets too much?

If you’re struggling to pay off your debts and you’re looking to speak to someone, the Money Advice Service has put together some advice on what to do.Citizens Advice has also outlined how to create a plan to pay off debt, which might be helpful.


Being in debt can get you down. Debt charity StepChange offers free, confidential advice, and it’s worth seeking it out, even if that means you have to confront how much your overdraft is really costing you. StepChange’s online debt remedy tool will put together a personal budget and tell you whether it’s a good idea to take on a DMP.