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12 Nov 2015
Adam Jolley Adam Jolley

Three ways to clear your debts


If your outgoings have pushed your finances into the red, we look at three ways to clear your debts and get your bank balance back in the black.

Debt blackboard

In his summer 2015 Budget Chancellor George Osborne once again talked about reducing the nation’s deficit.

This is the difference between what the government spends and what it receives in taxes.

But it’s not just the government that’s in need of balancing the books: according to figures from accountant PWC, the average UK household debt - excluding mortgages - is set to hit £10,000 by the end of 2016.

So what better time to sort out your own finances. Here are our top three ways to clear your debt.

1. Draw up your own budget

Woman using a calculator

If you’re looking to cut your monthly outgoings and clear your debts, one of the best places to start is to draw up your own budget for the year.’s head of money Nerys Lewis says a well-planned budget is a good foundation for sorting the rest of your finances out.

Where could you make savings?

"In your budget you should include all of your major outgoings, such as mortgage, car insurance and energy bills, as well as smaller expenses such as a Netflix account, for example," she says.

"This could make it easier to see where you could make some savings."

Factoring in peak spending periods such as family birthdays and Christmas is also a wise idea – that way you can plan ahead and save up.

Remember your emergency fund

When making a budget, don’t forget the all-important emergency fund, adds Lewis.

"If you’re paying off debts it may seem hard to put away a bit extra for a rainy day.

"But if your boiler breaks in nine months’ time, for example, you won’t need to resort to a payday loan to cover the cost."

Always do your sums first. If you’re paying through the nose in interest on the likes of a credit card, then using savings to pay off your borrowing could save you hundreds of pounds a year.

2. Check your credit rating

Sign post

It’s worth checking your credit file or report when you draw up your yearly budget.

You can sign up to a free trial with one of the main credit agencies, Experian, Callcredit or Equifax.

Or you can pay £2 for your statutory report via one of these agencies, which contains details of your credit history.

Your credit report is important as it can affect everything from getting a mobile phone contract to missing out on energy discounts.

Repair a less-than-perfect credit rating

As well as understanding the importance of your credit report, it also pays to know how to repair it if it’s less than perfect.

You can also spot any errors that may have been logged against your name.

For example, if you have fully paid a county court judgment, or if your bankruptcy has ended, make sure this is shown on your report.

There are several simple things you can to do to repair your credit score.

These include making sure you’re registered on the electoral roll, paying all your bills on time and making more than the minimum payments on existing credit cards.

3. Tackle the most expensive debt first

Brits paid out a total of £146 million in interest on personal debts every day in September 2015, figures from The Money Charity show.

With this in mind, and if your finances can only stretch so far, you should work out the debts you’re paying most interest on.

Take credit cards, for example, often people in debt have more than one credit card, says Lewis.

"If you have three cards, for example, all charging different rates of interest, you might want to keep paying the minimum balance on two of your cards.

"But pay more than the minimum off the card with the highest interest rate in order to clear the balance quicker."

Speak to someone

Finally, if you are having problems with debt, there are several organisations where you can receive free advice.

Citizen’s Advice, National Debtline and StepChange all offer free debt advice.


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