Follow Instagram debt experts, don’t fall into the minimum payment trap & 6 other ways to help you get debt free in 2025
IF getting out of debt is your new year resolution then we’ve compiled eight simple steps to help you.
About 4million people relied on credit to pay for Christmas, according to debt charity StepChange.
Half of borrowers will take more than six months to repay it.
“Christmas can be hard on our finances, and the pressure to spend big on gifts, food and festivities can often bring money worries and debt problems in the new year,” says Simon Trevethick, from StepChange.
The charity often sees a spike in people asking for help with their debt once the Christmas trees are packed away and the first credit card bill of the season arrives.
Laura Whateley explains how to reduce your debt . . .
1. OPEN YOUR POST
When financial difficulty strikes, it is very common to bury your head and let the letters pile up. But the less you pay attention to your debts, the larger they will grow.
“It can be extremely tempting to ignore the envelopes or emails but resist the urge to leave them alone,” says Grace Brownfield, from charity National Debtline.
“Take a deep breath, open all of your statements and get a handle on how much you owe.
“Make a list of all your debts, including the outstanding balances and repayment dates.”
2. CREATE A BUDGET
Do you know exactly what you spend each week or month? The better you can understand your own finances the more likely you are to find extra cash to clear debts quicker.
“Include a detailed record of all of your income, outgoings and any debts that you have,” says Simon Trevethick, from StepChange Debt Charity.
“Are there direct debits or subscriptions you no longer need? Could you switch to a cheaper supermarket for the weekly shop?
“Creating your monthly budget is an opportunity to set small bits of money aside for next Christmas, to help prevent future difficulties during the festive season.”
You can use old-fashioned pen and paper, or try banking apps that help you categorise your spending and identify, at a glance, your biggest outgoings.
3. DON’T FALL INTO MINIMUM PAYMENT TRAP
If you had a debt of £2,500 on a credit card with a typical interest rate of 21.9 per cent, and you cleared only minimum payments, starting at about £67 a month, it would take you more than 26 years to pay in full, according to Barclaycard’s repayment calculator.
You would have paid a huge £6,391 in total including interest.
If you adjusted the payment to a fixed amount of £70 a month, on the same debt, it would take you four years and seven months to clear the balance, and it would cost you almost half the amount in interest, £3,825.
Making only minimum payments is a way to trap you in debt for longer as very little money is going towards clearing the initial debt.
4. USE 0 PER CENT FINANCE
If you feel you are in control of your credit card or overdraft debt, and you believe you have a reasonable credit score, but are wasting money on interest, shift your debt to a 0 per cent balance transfer credit card.
These give you a period of time, often two years, where no interest is charged so all your repayments will go towards clearing the primary debt.
Make sure that you cover more than the minimum repayment, however. If you don’t clear the debt within the set timeframe, the interest charged shoots up to a really high rate.
The best deals at the moment include Tesco Bank’s Clubcard credit card with a 0 per cent balance transfer period of 29 months.
This comes with a fee, 2.95 per cent of the balance you are moving across, but will almost certainly work out cheaper than paying interest.
Barclaycard’s Platinum 14-month balance transfer Visa has a shorter period of 0 per cent, but comes with no fee.
5. SPEAK TO YOUR BANK
While it can seem daunting, pick up the phone or message your bank, creditors or utility providers, as it may be easier than you imagine.
They are used to people struggling to repay and have options available to help customers.
“Creditors may be able to offer you a more affordable repayment plan, or a payment break while you get debt advice,” says Brownfield.
On its website, National Debtline has template letters and emails you can use to explain your situation.
6. CONSOLIDATE LOANS BUT WITH EXTREME CAUTION
If you owe money to many different creditors, it can be overwhelming to stay on top of what needs to go where.
Debt consolidation loans promise to simplify this. This is where you take out a personal loan, use the money to repay all your creditors then focus on clearing just the one product.
Be aware that the loans have strict terms and you are taking on more debt, which means they could have an impact on your credit file.
Always steer clear of any company that offers debt consolidation that you have to pay to access. This is very expensive.
7. NEVER PAY FOR ADVICE
Many people in debt are targeted by predatory companies promising to help them, for a fee. You do not need to pay for debt advice.
There are charities that help people from all walks of life and all are happy to offer an initial assessment to see how they can support you.
8. FOLLOW INSTAGRAM DEBT EXPERTS
You are not the only one struggling with outstanding loans. It can be helpful to seek practical advice as well as emotional support from those who are in the same boat.
There are lots of people on social media posting about how they have worked out how to save money or cut back.
There are even Debstagrammers, people posting their debts on Instagram, to inspire others to pay down their debts, too.
Try following the hashtags #debtfreecommunity, or #debtfreejourney on Instagram, Facebook or YouTube.
Forums can also be useful, MoneySavingExpert has a group where members help each other.
Trusted methods to pay off loans and cards
REPAYING debt can feel like climbing a particularly icy mountain but there are two methods that could help you.
The avalanche method is the most logical.
You start by laying out everything you owe to different creditors, ranked by the cost of the debt.
Usually this means the debts with the highest interest rate.
These are the loans to focus on first.
The quicker you pay off the highest interest debts, the less you will pay over the longer term.
The downside is this can feel tough going as you spend all your time chipping away at a particularly expensive large loan.
This is where the snowball method comes in.
Here you lay out all the loans you owe and start by repaying the smallest, regardless of its interest rate.
The idea is you will stay on track because you will feel motivated by being able to clear a loan or credit card, close the account and move on to the next.
Over the long term you may pay more because it could take you longer to address your debts with the highest interest rates, but if the technique keeps you on track then it will be worth it.
‘Weight off my shoulders after I confided in charity’
JASPAL SINGH BAHARA, 52, from Coventry, thought he could manage his £42,000 of debt, mainly on credit cards, making minimum monthly payments.
But then his wife broke her leg and was no longer able to do night shifts in a warehouse.
Jaspal said: “We had two children and a mortgage. We moved money around a few different zero-per-cent credit cards to keep our heads above water. I felt like the debt was a weight trapping me. At one point, I even rang our insurer to ask if they cover suicide.”
Jaspal decided to seek free help from charity StepChange. It was an enormous weight off his shoulders.
He said it “restored his dignity”, offering hope of a solution and reassurance he had not failed.
The charity helped him to create a budget and work out how much he could pay back each month. Then Jaspal made one payment monthly to the charity, which passed it on to creditors. It took him a decade to clear it.
He said: “The day that I made my final payment, the relief was amazing. I feel very lucky to have been supported. There was always someone on the other end of the phone to talk or cry to, and who would help communicate with my creditors on my behalf.
“I’d like to tell people out there to talk about it. There’s light at the end of the tunnel.”