Debt has a way of taking up space in your head long after you have closed the banking app. The letters, the balances, the worry about what happens next. If that sounds familiar, the most important thing to know is that there is almost always a way forward, and you do not have to work it out on your own.
This guide sets out a practical plan you can start today. Take it one step at a time.
Step 1: Get everything down on paper
It is tempting to avoid looking, but you cannot make a plan for numbers you do not know. Gather your statements, letters and apps, and write down every debt with:
- who you owe and how much
- the interest rate
- the minimum monthly payment
- whether you are behind, and by how much
Next to that, write out your monthly income and essential spending. Our guide to budgeting methods that actually work can help you set this up in a way that suits you.
Step 2: Deal with priority debts first
Not all debts carry the same risk. Priority debts are the ones where falling behind can lead to the most serious consequences, such as losing your home, having your energy cut off or even a prison sentence in rare cases. They include:
- rent or mortgage arrears
- council tax
- gas and electricity
- court fines and child maintenance
- tax owed to HMRC
- hire purchase on a car you need
Debt advisers generally suggest covering these before paying anything extra towards credit cards, overdrafts or personal loans. It can feel wrong to put council tax ahead of a credit card, but the consequences of falling behind are very different.
Step 3: Choose a repayment strategy
Once essentials and minimum payments are covered, two popular approaches put any spare money towards one debt at a time.
The snowball method targets your smallest balance first, regardless of interest. When it is cleared, you roll that payment into the next smallest. You see results quickly, which keeps you motivated.
The avalanche method targets the debt with the highest interest rate first. It usually saves you the most money overall, though it can take longer to feel like you are getting anywhere.
Both tend to clear debts faster than spreading small overpayments across everything. Which suits you depends on what you are most likely to stick with.
Step 4: Talk to the people you owe
If you cannot keep up with the minimum payments, contact your creditors before you miss a payment if you can. Explain what is going on and offer what you can realistically afford. Many will agree to lower payments for a while, and some may freeze interest. Get any agreement in writing.
Ignoring letters rarely makes things better. Charges can build up, and the debt may be passed to a collection agency, which is far more stressful to deal with.
Step 5: Get free debt advice
Free, confidential debt advice is available from StepChange, National Debtline, Citizens Advice and MoneyHelper. An adviser can check your budget, talk to creditors for you and explain options such as a debt management plan or, if your situation is serious, formal solutions like a Debt Relief Order or an IVA.
In England and Wales, an adviser may also be able to put you into Breathing Space, which pauses most interest, charges and enforcement action for 60 days while you get things sorted. Scotland has its own protections.
You should never need to pay for debt advice. Be wary of firms that cold call, promise to wipe your debts or charge upfront fees.
Step 6: Think carefully before borrowing more
When you are under pressure, a new loan to pay off old ones can look like a fresh start. It can move the problem around, add costs and leave you owing more, so it is worth speaking to a free adviser before taking on any new credit. Once things are steadier, our guide to what affects your credit score explains how to rebuild your record.
Debt can affect your mental health. If you are struggling, Mind has information on money and mental health, and Samaritans are there to listen any time, day or night.
This article is general information, not financial advice. For free, impartial help with your own situation, visit MoneyHelper.
