If you want to clear your debts as quickly as possible, the following tips can help.
Create a budget plan
Creating a budget plan is a good first step to take, as it allows you to track your monthly expenditure accurately. Understanding where your money is going every month can help you narrow down which expenses are essential and which can be eliminated. By eliminating any expenses that aren’t a necessity, you could free up cash that can go towards paying off your debts.
Be sure to review your budget regularly to check whether your spending is within your set limits. A budget planner doesn’t have to be complex and you can even use our free budget planner to guide you. There are also various apps available to help you track spending and manage your budget.
Reduce your outgoings
Once you’ve made a budget plan, you can then identify where you can cut back. Luxuries such as TV subscriptions and gym memberships might need to be put on hold while you focus on clearing your debt. You can also look at ways to make savings on your weekly shopping, for example, by switching to supermarket own-label brands or buying less meat. And don’t forget to shop around to see if you can get a better deal on expenses such as your phone and broadband.
Pay off high-interest debt first
If you want to clear debt quickly, it usually makes sense to pay off the most expensive debt first. In the majority of cases, the most expensive debt is that with the highest interest rate, and settling this type of debt first can provide more financial and emotional relief.
Switch your credit card debt to 0% interest
If you’re struggling to pay off expensive credit and store card debt, consider opening a 0% balance transfer card. These cards effectively pay off your old expensive debt so you’ll owe money on the new card instead, but at a much lower – often 0% – interest rate. A balance transfer card will typically have a 0% rate for a set period, for example, 28 months, during which time you’ll pay no interest (although you may have to pay a small fee).
Depending on how much you owe and the previous interest rate, this strategy could potentially save you thousands of pounds in the long run. It can also help you to clear your debts faster as more of your money will go to paying off the actual debt rather than the interest.
Pay more than the minimum balance
To positively impact your debt, it’s a good idea to pay more than the minimum payment requirements. If you’re able to do so, paying more off each month could mean that you clear your debts faster, and you’ll pay less interest overall.
For example, let’s say you owe £2,000 on a credit card with an APR of 20% and you only pay the minimum balance of 2.5% every month. In this case, it will take you nearly 35 years to pay off your balance and you’ll have paid a staggering £5,000 in interest overall. However, if you were to pay, say, £100 every month, you’ll have cleared the debt within two years and your overall interest payments will amount to £530.
Pay in cash rather than on a credit card
It’s easy to incur debt by spending on your credit card, particularly when the cost of living crisis is putting further pressure on household budgets. According to Statista,total credit card debt in the UK grew by half a billion pounds between July and August 2023, reaching a similar level of debt as seen in early 2017.
If possible, use cash and remove your credit card from your purse or wallet so you’re not tempted to spend. If you can stop using your credit card, you may also find it easier to pay off existing credit card debt.
Find ways to boost your income
Increasing your income means you’ll have more spare cash to put towards paying off your debt. Even if a pay rise isn’t on the horizon, there are plenty of other ways you might be able to boost your income:
Check you’re claiming all the state benefits you’re entitled to – you never know, you might be missing out on valuable payments. The Gov.uk website contains some handy calculators to help you work out which benefits (if any) you’re entitled to
Check your tax code – the wrong tax code can make a big difference to your monthly take-home pay
Sell unwanted items – another way to boost your income is to sell unwanted items around your home. It might not seem much, but every little bit of extra cash can make a big difference when you’re trying to clear debt
Reclaim rebates and charges – if you were mis-sold a payday loan or you’ve paid bank charges for going over your limit, check whether you can reclaim any money. Likewise, if you had to work from home during the pandemic, you might be able to claim a tax rebate to help cover your increased costs. Visit the Gov.uk microservice website for more information
Rent a room in your home – under the government Rent a Room Scheme, you can earn up to £7,500 a year tax-free (2024/25) from letting out a room in your home
Start a side hustle – do you have a hobby or talent that you could monetise to bring in some extra cash? Websites such as Fiverr and peopleperhour have become popular with people looking to offer their services online, while platforms like Etsy are great for anyone wishing to sell crafts or handmade items.
Talk to your creditors
If you’re worried about missing a payment, speak to your creditor. Let them know you’re experiencing financial difficulties so you can work together to find a solution that works for you both. They have a responsibility to support you by offering a range of affordable options to help you pay off what you owe.
