Step 1: List what you owe
Before you start, make sure your priority bills are paid: rent or mortgage, Council Tax and energy. Falling behind on these can cost you your home or your energy supply, so they come before cards and loans.
Write down each debt with its balance, interest rate and minimum repayments. For example:
| Debt | Balance | Interest rate | Minimum a month |
|---|---|---|---|
| Credit card | £6,000 | 22% | £180 |
| Car loan | £9,000 | 8% | £280 |
| Personal loan | £2,000 | 10% | £90 |
That’s £550 a month of minimums. Say you can pay £200 more, £750 a month in all.
Step 2: Pick a method
Both methods pay the minimum on everything and put the extra on one debt. When it’s paid off, its payment rolls onto the next.
- Avalanche: the highest interest rate first (here, the credit card). It costs the least.
- Snowball: the smallest balance first (here, the personal loan). You clear a debt sooner, which keeps many people going.
Worked out month by month, as in our debt payoff calculator.
The difference between the two methods is small here. What matters most is paying more than the minimums, and keeping at it. Try your own debts in the debt payoff calculator.
Step 3: Pay less interest
- A 0% balance transfer card moves card debt to a card with no interest for a set time, often 24 months or more in the UK, usually for a fee of around 3%. Pay it off before the 0% ends, and check eligibility first with a soft search.
- A consolidation loan at a lower rate can replace several payments with one. It only helps if you don’t run the cards up again.
- If you’ve paid more in interest and fees than off the balance over 18 months, your card provider must contact you and help you pay it off faster (the FCA’s persistent debt rules).
Step 4: Find more to pay
- Make a budget and give the extra a fixed amount each month. The budget calculator shows where your money goes.
- Put windfalls on the debt: tax refunds, bonuses and gifts.
- Stop adding to it: take the card out of your phone’s wallet, and pay by debit card while you clear it.
Step 5: Stay out of debt
Once a debt is gone, keep paying the same amount into savings. An emergency fund means the next surprise bill doesn’t go back on a card. If you can’t keep up with your payments, get free help early: see help with debt.