How To Start Clearing Off Debt

According to a poll by money.co.uk only 22% of people in the UK didn’t carry some form of debt into 2021. The survey indicated the average adult ended 2020 with almost £10,000 of a debt. And while this was lower than the year before, chances are most of us will be in debt at some point in our lives. Especially after the last year we’ve had. And to start clearing off debt can be a daunting thought.

The furlough scheme is winding up now, putting millions of jobs at risk. And the world hasn’t been kind to us, and there’s a lot of stress and worry for people. But if you’re struggling with debt from credit cards or loan payments, it’s important to start planning your next steps now.

How to start paying off debt- Use a payment calculator

Work out your starting point before you do anything else. Use a payment calculator like this one from Pigly to see where you’re at. You can input things like your balance, APR and repayments over a set number of months to see the cost of your credit. You can then compare it to another card’s APR (if you did a balance transfer). Or you can see where you’d be if you made a larger monthly repayment. Some numbers may shock you into pushing even harder to pay off your debt.

For example if you had a £10,000 debt with an APR of 23% and you were paying off £200 a month then you’d be paying it off for 168 months! And it would cost you over £23,000 in total. No one wants to pay that much interest if they can avoid it.

Pay as much as you can off your debts

This may seem like an obvious one, but the more you pay off your debts the quicker you’ll be debt free. Reassess your budget and see what you can cut out to free up more money to pay off debts. If you just pay off the minimum amounts for your debt not only will it take you much longer to clear them but you’ll be paying more in interest. Pay as much as you can afford to off your debt. But start paying off debt in a sustainable way i.e. don’t go too full on where you’ll end up spending more on credit because you’ve not left yourself with enough money to live on.

I’ve done a full post on the avalanche vs snowball debt clearing method, so check that out to see which one might be best for you.

How to start clearing off debt- Balance transfers

If you have credit card debt then see if you can do a balance transfer to a O% interest or lower interest card. If you’re eligible for a 0% interest credit card and can balance transfer, this gives you a bit of breathing space. That isn’t to say you shouldn’t be paying as much as you can off it. But it will stop any additional interest payments and leave you feeling less stressed. Even a lower APR could make a big difference. You can use price comparison websites to see the card options out there.

Consolidate debts

If you have lots of debts, it might be worthwhile looking into consolidating them into a single payment. Mentally it might help you to keep track of even if it doesn’t save you any money in the long run. MoneySuperMarket have a handy guide about debt consolidation loans here, but consider this offer carefully before you go ahead.

How to start clearing off debt- Get help

Don’t be hard on yourself for getting into debt. The world has been turned upside down, and there’s so much pressure already without putting yourself in more. A lot of people have suffered, and the fact that you want to start clearing off debt is a huge step. But remember, you don’t have to suffer in silence. If you’re struggling or don’t know what to do next, speak to a professional. You can speak to a free debt charity like StepChange or PayPlan, who can go through your situation and help with a plan over the phone. They can even help act on your behalf when dealing with creditors.

Pin It