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Top tips to clear your debt

Top tips to clear your debt

Category: Debt

Updated: 28/05/2014
First Published: 28/05/2014

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

It can be all-too easy to see debts mount up. A few credit card purchases here, a loan for home improvements there, perhaps the odd reliance on an overdraft and before you know it your monthly repayments are spiralling out of control. But, there are things you can do, so we've put together a few top tips to help you clear your debt once and for all.

Use 0% balance transfer cards

If you've maxed out a credit card or two and are serious about getting rid of the debt, consider transferring it onto a 0% balance transfer card. Competition in the market is fierce which means you can get balance transfer deals for as long as 32 months (with Barclaycard's Platinum 32 Month Balance Transfer Visa), giving you plenty of time to clear the balance in full – and all without additional interest adding to the bill.

A few things to bear in mind though. Just make sure you'll be able to clear the amount by the time the deal ends or interest will start adding up again, often at a fairly high rate, and never miss a payment otherwise the 0% deal could be withdrawn. You'll probably need to make more than the minimum payment to ensure you're able to clear it, and avoid spending on this card at all costs – simply view it as a means to an end, because the purchase rate could well be hefty and will negate the benefits of the card.

Consolidate with a personal loan

If you've got a lot racked up on the likes of credit cards, car finance or overdrafts, you might want to consider consolidating the whole amount with a personal loan. It's a popular choice - according to research from Ocean Finance, 29% of people with multiple unsecured debts plan to consolidate them over the next five months, with the majority (40%) planning to do so with a loan.

It could well be a sensible decision, as having one loan rather than several forms of credit will be much easier to manage – there'll be one interest rate and one set monthly payment, helping you keep an eye on your budget. You'll have a clear route out of debt too, as you can't be tempted to simply make the minimum payments and will instead be able to clear everything by the time the term ends.

As an added bonus, you'll ideally be getting a much lower rate as well. Rates start from as low as 4.3% for a £7,500 loan while credit cards (for example) will often charge in the region of 18%, so you could well find that your payments are a lot more manageable. Use our handy loan calculator to see the kind of options available and whether or not you could save money in the process.

Got savings? Then use them to pay your debts

Putting aside a bit of money each month is something that everyone needs to get into the habit of, but if you've already got an emergency fund and are considering saving more, stop right there – you should always pay off your debts before you put money away, because the amount you'll be spending on credit interest will far outweigh any returns you'll get from your cash savings.

Stop spending!

It seems so simple and yet can be so difficult to stick to, but there's one key thing you can do to get on the path to proper money management – stop spending on credit! You might think that a few pounds here and there won't matter too much, but just tell yourself that that's what got you into debt in the first place and hopefully you'll make the sensible decision.

Ideally, the only time you should spend on credit cards is if you want to take advantage of the likes of cashback deals, perhaps using it as an alternative to a debit card, but just make sure to clear the balance in full at the end of each month otherwise the interest will outweigh the benefits.

That means if you've transferred existing credit card balances to a 0% deal then cut up the previous cards and cancel the accounts, or if you've cleared your overdraft using a personal loan then ask your bank to remove the facility so you're not tempted to dip into it (unless you want the smallest of buffers, just in case).

So, if you're serious about clearing your debts then all is not lost. Just bear in mind these top tips and you could be on the road to being debt-free before you know it.

What Next?

Find the best savings rates

Compare loan repayments and interest with our easy-to-use loan calculator

Repay your debt sooner with a 0% balance transfer card

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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