Our Guide To The Question, ‘How Can I Clear My Debts’?

Love Debt free 5 point guide to clearing your debt
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Having even a small amount of debt to your name can feel overwhelming if you’re on a budget, and it may feel as though you’re destined to spend years chipping away at your debt.

However, there are steps you can take to help clear your debts without the help of extra income.

Below we’ve listed five actions which could help you work your way towards living debt-free.

So keep reading and starting putting these pointers into action.

1 – Confront Your Debts

The first thing you’ll need to do to start clearing your debts is to get real about how much you owe. The very fact you’re reading this article is a good first step in facing the issue of debt, but to start making real headway, you’re going to need to get to grips with the specifics of your problem.

  • Start by writing down all of the debts you owe: from overdrafts to energy bills, to Uncle Phil’s £50.
  • Now, add it all up. Don’t guess how much you owe– use your latest statements to find exactly how much is left. If you don’t have statements to hand, contact the creditor and ask for a copy
  • Next, identify which debts are ‘priority debts’. These are debts which need to be paid first because late payments come with serious consequences. Priority debts include things such as mortgage bills and council tax (if you’re not sure what constitutes a priority, you can check in the table further down)
  • If you know you’re in arrears or late with any accounts, highlight them
  • Finally, write a new version of the list, arranging your debts in order of urgency:
    • Priority debts in arrears
    • Priority debts
    • Non-priority debts in arrears
    • Everything else

You now have an accurate picture of your monthly debt spending and total debt, in order of priority.

2 – Choose A Strategy

Once you have a clear picture of your priority debts and essential spending, you can pick a strategy to deal with the remaining debt.

It’s important to keep making the minimum payments on all of your debts, but having a strategy is key to chipping away at your negative balances faster – and keeping you motivated on your way to debt-free living.

Take your pick from either of these approaches to help make a dent in your debts:

The Snowball

Continue making minimum payments on all of your accounts. Put any extra cash towards the debts with the smallest balance. Once you’ve paid off the smallest debt, take the minimum payment from that account and put it towards the next-smallest debt along with any extra funds you have.

You’ll be able to clear a number of smaller debts quickly – which is great for motivation- and gradually build up more money to put towards the big ones, every time you pay off an account.

The Avalanche

This is essentially the opposite of the snowball. You continue making minimum payments on all of your accounts, and put any extra cash towards the account with the largest balance.

It will take a long time to pay off that account; but when you finally do, you can use the money you used to spend on it to clear smaller accounts, which will fall away in quick succession.

Because you take care of your largest (most expensive) debt first in this strategy, you’re likely to save more money on interest with this strategy than with the snowball.

Look For Cheaper Ways To Be In Debt

While you are working towards paying off your debts, find out whether there is any way you could be spending less on interest and other fees with the accounts you have:

  • If you have held an account for a long time and have a good track record of paying on time, you could try to negotiate with the lender for a lower interest rate. It is more common than you might think and could save you money without the administrative hassle of switching to a new lender
  • Consider debt consolidation. If you have a reasonable credit rating, you may be able to move all your debts to one place with a personal loan. These often have comparatively low-interest rates and could be a cheaper option than holding debt on a credit card or overdraft
  • The one thing better than a low-interest rate is no interest rate. If you have a reasonable credit rating, you could be eligible for no-interest deals on balance-transfer credit cards. This allows you to move your debts onto a credit card which charges no interest for a fixed amount of time- normally up to 18 months

4 – Maximize Your Resources

Once you’ve minimised your debt expenditure, it’s time to maximise your assets:

  • Plan a budget if you don’t already have one, and stick to it. Use your bank statements to see exactly where you’re spending and see if there are areas where you can cut back.
  • Sell unwanted belongings. This one doesn’t require much explanation. If you have unloved items lying around your home which could be sold to make a dent in your debt instead, it’s time to get rid of them.
  • Use your savings to pay off your debt.

5 – Get Support

If you find that your debts are affecting your mental health or quality of life, consider seeking professional help. A debt counselling agency can work with you to come up with an affordable repayment plan.

They may negotiate with creditors on your behalf to help reduce your payments, and may even help by distributing your payments to creditors each month.

Ideally, this should be a last resort, as debt management plans can harm your credit rating.

How Can Love Debt Free Help?

Here at Love Debt Free, we have partnered with some of the UK’s leading Debt help companies.

They have already helped thousands of people reduce and manage their debts, and they can do the same for you.

Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these debt help companies, click on the below and answer the questions.

Len Burgess
Len Burgess
Len Burgess is a successful digital entrepreneur and founder of LBLK Publishing which specialises in Financial content. Len has been writing professionally on financial and business topics for 5 years before starting Love Debt Free.
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