Step 4: Pay off your debts

Practical support for manageable debts

Maybe you have a balance on a credit card, a loan or a couple of store cards. Whatever the situation, if you feel your debt is manageable, now is the time to take action before it gets out of hand. The very fact that you're looking at how to manage it is a great first step towards breaking the cycle and becoming debt free.

Your action plan:

1. Make sure you know how much you owe so you can work out a repayment budget you can stick to.
2. Make a list of all your debts and prioritise them - for example, if you have a car loan, your car may be repossessed if payments slip, so this may be a higher priority than a credit card payment.
3. If you only pay the minimum amount on credit and store cards, look to increase this by setting up a standing order or direct debit for a fixed amount.
4. It's hard to clear all cards at once if you have more than one. Look at the interest rates and balances on all your cards and aim to pay off the card with the highest interest rate first, as this is costing you the most money. You should try to pay more than the minimum monthly payment as this will reduce the amount owed and the interest on it.
5. Review your budget regularly so you know how much cash you have to live off. With a clearer understanding of your spending and accurate budgeting, you shouldn't run out of cash and be forced to pay for day-to-day items with your credit cards. If you find you are doing this, you should review your budget again and see what changes you can make.
6. You could think about transferring a balance to a new card with an introductory 0% interest rate, but be sure you take into consideration any charges made for balance transfers as well as what the rate will be at the end of the introductory period. Lots of card providers charge for making balance transfers, and this cost could work out more than the interest payments on your existing card, even taking into account the 0% period. If you decide this will still save you money, you should close the account of the card you've transferred the balance from too, to avoid temptation.

Related Content

• More guidance on dealing with debt
• Tips on building an action plan to deal with your debts
• Things to consider if you need to borrow money
• Plan your monthly budget to understand what you can afford