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1. Financial planning
2. Manage your debt
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Manage your debt

If your financial situation seems like it is unmanageable then it might be a good idea to seek advice. In this short guide we take you through some options you have to manage your debt.

Even if your debts are under control, it's worth reviewing whether you're paying them off in the right order, have the right debt solutions for you or if you can pay them off faster or save money.

The MoneyHelper bill prioritiser can help you sort your bills and payments in the right order and tell you what you need to do if you’re struggling to pay before you miss a payment. They recommend you: 

  • pay off the minimum amount on all debts to avoid falling behind
  • pay more if you can afford to, starting with the most expensive debt - check whether there are any early repayment penalties or charges before overpaying though
  • once that's cleared, move on to the next most expensive until they are all cleared

They recommend splitting your debts into three categories:

  • Debt emergencies
  • Priority debts
  • Non-priority debts

If your debts are becoming unmanageable or you're facing an emergency like court action or eviction, you're not alone. Even though you may be feeling overwhelmed or scared, there’s free help available to support you. You can contact StepChange 24 hours a day, 7 days a week. 

Priority debts are those that carry the most serious consequences if you don’t pay them. They're not always the biggest debt or the debt with the highest interest rate, but if you don’t pay them it could lead to serious problems.

These include:

  • court fines
  • council tax
  • TV licence
  • child maintenance
  • gas and electricity bills (water and sewerage are treated as non-priority debts but if you don’t pay at least your current water bill the amount you owe will continue to go up)
  • income tax, National Insurance and VAT
  • mortgage, rent and any loans secured against your home
  • hire purchase agreements, if what you are buying with them is essential
    benefit and tax credit overpayments.

It's important that you pay these off first as you may be visited by bailiffs, receive a court summons, be made bankrupt, lose your home or have your heating or lighting cut off because you haven’t paid your bills.

The consequences of not paying non-priority debts are less serious but if you don't pay these off your creditor could eventually take you to court or instruct bailiffs to collect money from you.

These include:

  • overdrafts
  • personal loans
  • banks or building societies
  • credit card, store cards, payday loans
  • catalogue, home credit and in-store credit cards
  • money borrowed from family and friends.

Useful links

  • National Debtline provide a guide to dealing with your debts. You can visit their website or call 0808 808 4000.
  • StepChange provide free debt advice. You can visit their website or call 0800 138 1111.
  • Citizens Advice. You can speak to their debt helpline through online chat or call 0800 240 4420.
  • Visit Gov.uk for other charities and organisations who offer free debt advice. 

Key points

  • If you're struggling with debt you're not alone. There's free support available to help you.
  • If you have been summoned to court, always turn up to your hearing.
  • You can get free debt advice, even if your court date is within 24 hours. They can speak to the court, bailiffs or creditor on your behalf.

Next steps

  • Speak to a free debt adviser to help you with your debt emergency. 
  • Pay off your priority debts first as these have more serious consequences. Make at least the minimum payments on your non-priority debts to stop these from becoming priority debts.
  • Visit our Financial planning hub for tips on how to plan for a brighter financial future.

Debt questions

Some credit cards have an introductory interest free period or lower interest, so it may be worth shopping around and changing your credit card regularly to take advantage of these deals.

These rates always have an end date on them where the interest rate will go back to normal. Check these rates before you take out the card because if you still have a balance outstanding at the end, the interest rate could increase considerably.

These types of special interest rates can be useful for you to consolidate various credit cards into one payment, potentially with a lower interest rate. There is usually a fee for transferring a balance to one of these cards but it can be worthwhile.

If you do move credit card debts to an interest free card, try not to spend regularly on this card too. Sometimes the 0% deal is for balance transfers only, not purchases. Purchases can be charged at a higher rate and often any payments you make will come off the higher interest rate balance first.

It is usually worth paying off your debt obligations as soon as possible as this reduces the total amount you will need to repay. Many lenders will allow you to do this.

Think about which debts are priorities and non-priorities and pay the priority ones off first.

Also think about which debts are the most expensive and pay these off first. These may be the debts with the highest interest rates which will cost you more to pay back over time.

However, it is worth checking whether or not your lender will charge you an early repayment charge as this might negate the benefit of paying off a loan before the repayment term is up.

This really depends on your individual circumstances.

One thing to think about is the cost of the debt, as sometimes the interest you are paying could have the effect of putting you in further financial trouble if you let it spiral.

This might be especially true of debt with high interest rates like credit cards or pay day loans for example. Equally, if you have taken out an emergency loan to cover short-term living costs, you might want to ensure you have some contingency cash in place so that you do not find yourself in the same position.

Yes, a second opinion might provide you with solutions that you could not see or did not even realise were available.

One option is to look at the MoneyHelper website, which offers suggestions ranging from debt consolidation loans and loans from not-for-profit organisations, local authorities, or the Social Fund for example. They provide a free ‘debt health check’ which asks some simple questions about your debts and then provides some targeted next steps to get things back under control.

If you are struggling you may also need some additional support. Check if your employer provides an Employee Assistance Programme (or EAP). You may be able to get some free support and counselling in your local area.