How to Actually Pay Off Debt

Getting a Clear Picture of What You Owe

The first step is always the same: write down every single debt. Credit cards, overdrafts, personal loans, car finance, buy now pay later, money owed to family, everything. For each one, note the current balance, the interest rate (APR), and the minimum monthly payment. This can be uncomfortable, but knowing your exact position is the only way to make a plan. People who have done this almost universally say it was less bad than they feared, and that seeing it written down made it feel manageable.

"The first step is always the same: write down every single debt"

Priority vs Non-Priority Debts

Not all debt is equal. Priority debts — council tax, rent arrears, mortgage payments, gas and electricity bills, court fines — carry serious consequences if unpaid, including losing your home or going to prison. Always pay these first, even minimum amounts, before focusing on non-priority debts like credit cards and personal loans. If you are behind on priority debts, contact the creditor immediately — most will agree a repayment plan, especially for the first missed payment.

The Avalanche Method — Saves the Most Money

Order your non-priority debts from highest interest rate to lowest. Pay minimums on all of them, then throw every spare pound at the highest-rate debt until it is gone. Then move to the next highest. This is mathematically optimal — you pay the least total interest over time. Example: a £3,000 credit card at 39.9% APR costs £1,197 in interest over 2 years if you only pay minimums. Overpaying aggressively clears it in under a year and saves nearly £800.

The Snowball Method — Most Motivating

Order your debts from smallest balance to largest, ignoring interest rates. Pay minimums on everything and attack the smallest debt first. When it is gone, roll that payment into the next smallest. Research shows that achieving quick wins keeps people motivated and more likely to complete their debt payoff. The snowball typically costs a little more in interest than the avalanche, but a method you actually stick to beats a theoretically optimal one you abandon. Choose whichever suits your personality.

"Order your debts from smallest balance to largest, ignoring interest rates"

Dealing With Overdrafts Specifically

Bank overdrafts now charge a flat interest rate — typically 39.9% EAR, making them as expensive as many credit cards. To escape: apply for a 0% money transfer credit card (MBNA, Tesco Bank) which pays cash directly into your current account, clearing the overdraft. Then repay the credit card interest-free over the 0% period. Alternatively, switch to a bank with lower overdraft rates — Starling Bank charges 15–35% depending on your credit score, significantly below most high street banks.

0% Balance Transfer Cards

If you have credit card debt, a 0% balance transfer card can be a powerful tool. You pay a one-off fee (typically 2–3% of the balance) and then owe nothing in interest for up to 30 months. This gives you a clear runway to pay down the actual debt rather than the interest. Use the MoneySavingExpert eligibility checker to see which cards you qualify for without a hard credit search. Set up a direct debit and divide the balance by the number of months to clear it completely before the 0% period ends.

Formal Debt Solutions

If your total unsecured debt is more than you can realistically clear in a few years, formal solutions exist. A Debt Management Plan (DMP) through StepChange consolidates your payments and negotiates with creditors — free to set up. An Individual Voluntary Arrangement (IVA) is a legally binding agreement to repay a portion of what you owe over 5–6 years — seek advice first as it affects your credit for 6 years. Bankruptcy is a last resort, clears most debt, but has serious long-term consequences for assets, employment, and credit.

"If your total unsecured debt is more than you can realistically clear in a few years, formal solutions exist"

The Breathing Space Scheme

If you are in serious debt and feeling overwhelmed, the Breathing Space scheme (Debt Respite Scheme) gives you 60 days of legal protection from creditor action and enforcement while you get debt advice. Interest and charges are frozen during this period. To access it, contact a free debt advice service like StepChange or National Debtline. There is no shame in using it — it exists precisely to help people in this situation get proper advice without the pressure of escalating debt.