Don't ignore the problem

While leaving bills and bank statements unopened can make things a little easier to face short term, it's really only making the situation worse.

Facing the problem head on is the only way to stop your debts from spiralling out of control and while this may seem a bit intimidating, it's got to be done if you want to work towards becoming debt free.

Make a debt-escape plan

Making a plan will give you focus and help you know understand exactly where you are financially. You will need to:

  • Work out how much money you have coming in each month. Include your regular wages as well as any benefits, child maintenance or any other income you receive.

  • Work out all of your outgoings, including 'essentials' such as your mortgage, outstanding debts and food as well as more 'luxury' spending.

  • Be realistic about these figures. Work to a 'worst case scenario' where you balance the lowest possible amount of income you're likely to have coming in against the largest outgoing you're likely to have, this way you'll never be caught short.

  • Identify how much money you have available to pay off your debts and where you're able to cut back and make savings on your current spending.

Once you've compared these figures don't be too alarmed if you have more money going out each month than you have going in.

The point of this exercise is to get a realistic view of your finances and identify what needs to change. Good or bad, once you know where you stand you're in a position to do something about it.


Give precedence to essential payments such as:

  • Your mortgage

  • Council tax

  • Secured loans

Keeping a roof over your head is your number one priority.

Utility bills, food and unsecured loans should come next in line, with 'luxury' items such as satellite TV, nights out, shopping sprees and home improvements sitting at the bottom of the liste.

Cut back

As it's so easy to spend money without thinking about it keeping a spending diary or write a budget can really open your eyes as to where your splashing out unnecessarily.

Try a few small changes like:

  • Taking a packed lunch to work rather than buying food every day

  • Sharing lifts to save on petrol and parking

  • Going for a run or bike ride rather than shelling out for an expensive gym membership

By cutting back on the non-essentials, at least for a little while, you'll have more money to put towards clearing your debts and more importantly, you won't need to take on any additional borrowing.

Pay on time

Whenever you're late with a payment, default completely or go over your credit card or overdraft limit you'll usually be charged an elevated rate of interest and a penalty. These fees quickly add up so it's important to try and avoid them at all costs.

Top tip

Arrange to make payments by direct debit just after you get paid to prevent unnecessary fees by ensuring that the money is available to go out of your account, and that it does so on time.

However, if you're not going to be able to make a payment for whatever reason it's important to contact your lender and explain your situation.

If you're up front and tell them that you are struggling they may be more lenient and willing to negotiate a payment holiday or the opportunity to reduce your monthly payments. Whatever the situation it's always better to let them know.

Re-jig your debts

By reducing the amount of interest you pay on your debts you will not only make your commitments cheaper but will also have more spare cash to re-direct back towards clearing your outstanding balances.

Credit cards

Take a look at your credit card statement; it should detail the rate of interest you're currently paying. In all probability it's around 15% or, if you've spent on store cards, anywhere up to 30%.

Your aim should be to reduce the amount of interest accumulating on your credit cards to as little as possible and thankfully there are a huge number of balance transfer credit cards available to help with this.

When it comes to making your credit card debt cheaper you really have two options:

  1. 1.

    Move the outstanding to a credit card that offers an interest free balance transfer (opting for one with the longest period possible). This is an attractive option although you will need to weigh the cost of balance transfer fees and the likelihood that you'll need to switch again after the initial offer expires into consideration.

  2. 2.

    Transfer your debt to a card that charges a discounted rate (usually 5-7%) until your balance is paid off. With this type of offer, while you will still be paying interest, it will be at a greatly reduced rate and you are unlikely to incur any fees or charges when you move.

For more information on your balance transfer options read our guide How to save money with a 0% balance transfer credit and to view the best balance transfer offers currently available check out our 0% balance transfer credit card comparison tables.


If you have committed to a fixed rate loan, whether it's secured or unsecured, it's unlikely that you will be able to move to a cheaper option without incurring a cost. However, this is still an option worth considering. Visit our loan comparison tables to compare your current loan rate with some of the best deals currently available.

When working out whether you could save money by moving your loan you will first need to contact your loan provider and find out how many monthly payments and how much of your debt you still have outstanding. It's also essential that you find out what the penalties are for early repayments.


This is likely to be your biggest expense so if you can save money on your mortgage it could make a big difference to the amount of money you have available to tackle other debts.

If you're currently paying your lenders standard variable rate (i.e. not tied into a fixed deal) you could be shelling out unnecessarily and looking to remortgage could be well worth your while.

First of all it pays to take a look at mortgage comparison tables so that you have at least a basic idea of the different types of deals available. It then pays to go back to your current lender and ask whether they are able to offer you a better rate. This can be a good option as you won't need to pay out for any of the repayment, application or legal fees associated with remortgaging.

t can be a good idea to speak with an independent mortgage advisor who will be able to explain your options and help you to work out the cost of moving your mortgage. Remember this is only worth doing if you can save money. Read our remortgaging guide for more information.

If you are tied into a fixed deal its unlikely that you will be able to save money by moving your mortgage as the penalty fees are likely to outweigh the benefits of switching to a better rate. However, making a note in your diary as to when your current deal ends is essential.

Don't borrow more

Despite what the glossy TV ads say, consolidation loans aren't always the best solution especially if, as they suggest, you borrow more to 'treat' yourself. That's not to say that they are never a good idea as they can be appropriate in some circumstances.

It is however important to avoid consolidating any unsecured debts (such as credit cards, overdrafts or loans) into a secured debt as this will put your property on the line meaning you have a lot more to lose if you can't afford to meet the repayments.

Cut the cost of essentials

The cost of running a household is significant and you could make substantial savings by making only small changes.

You should consider:

Insurance is another area where you can make big savings for relatively little effort so shopping around and comparing quotes is well worth doing.

Put your savings towards your debts

After giving yourself a 'financial detox' by switching to cheaper financial products and cutting own on your spending you should have freed up a little extra cash. So, rather than treating yourself for being so good it's important to plough this right back into your debt.

By putting as much money as possible towards paying off your debts each month (obviously where overpayments are allowed!) you'll be in a position to clear your debts much sooner than was previously possible.

Stick with it

Once you've got this far you're on the path to becoming free from your debts; you know what you have to do and how to do it. However, the hard part isn't quite over yet.

You will need to keep on top of things to make sure that you reach your ultimate goal of clearing what you owe completely. It won't always be easy and can seem like you have a long way to go but once you have a plan in place and get into the practice of thinking before you spend things can seem a lot more manageable than they feel right now.

Having said that if you feel you are struggling with unmanageable debt and you really can't see a way out it's important that you contact a free advice agency such as the Citizens Advice Bureau who will be able to suggest alternate means by which you can address your debt.