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How to get out of debt

Prioritising your debts may help you feel more in control of your money.

Understand your debts first

Taking stock of any debts you may have can help you work out how to tackle them. 

Make a list of all your debts, including how much you’ve left to pay and what the monthly minimum repayments are – to help you prioritise paying them off. There may be some debts where you can increase how much you’re repaying – just make sure there are no early repayment charges for doing so.

You’ll need to make sure you’re meeting the minimum repayments on all your debts. 

Budget for debt repayment

Create a budget to review your spending and assess how much you have available to repay each month. If you can, look at any areas where you could cut back to free up more money. 

Use our budget planner to help. 

Explore: How to manage bills

See if you can reduce your interest rates

If you’re able to, see if you can reduce the amount of interest you’re paying. For example, consider moving existing credit card debt to a balance transfer credit card with a lower or 0% interest rate. 

If you’re able to pay off the full credit card balance in the introductory period, it can help you pay less interest overall. The interest rate will rise when the introductory period ends, so make sure you’re able to clear the debt before this happens. 

You could also look at a debt consolidation loan if you have multiple debt repayments to keep on top of. 

Choose a debt repayment strategy

Once you know how much you have available for repayments, make a plan using one of the methods below.

Method 1 – Pay off the most expensive debt first

Typically, a cost-effective option is to repay the debt with the highest interest rate first, as it’s charging you the most to borrow the money.

List your debts in order of interest rate, going from highest to lowest. Prioritise paying the debt at the top, working your way down the list over time. 

Remember – you’ll still have to meet the minimum repayments on all your debts.

Method 2 – Pay off the smallest debt first

While it may not be the most cost-effective method, some people prefer to pay off their smallest debts first so they can reduce the number of debts they have to think about. 

If you feel this may suit you, make a list of all your debts with the smallest debt at the top and the largest debt at the bottom. Prioritise paying the debt at the top, working your way down the list over time. 

Again, you’ll still need to meet the minimum repayments on all your debts.

Method 3 – Debt consolidation

If you’re finding juggling multiple debts too stressful, a debt consolidation loan can be a way to simplify your repayments and get back on track. A debt consolidation loan merges debts, giving you:

  • a single interest rate
  • recurring repayments
  • a clear loan term

This can help make managing your debts feel less stressful. However, it’s important to work out if it'll mean having to repay more on a monthly basis and over the course of the loan. 

The amount you borrow, loan term and interest rate will determine how much interest you have to pay over time – you can use our calculator to estimate how much this could be.

Next steps

Whatever method you choose, try to repay as much as you can each month to reduce the amount of interest you’re charged.

If the amount you have available isn’t enough to meet your repayment terms, you may be able to make arrangements with your lending providers to make things more manageable. Remember, if your debts do feel too much, you can always get in contact with either your bank or government services for help.

Explore: Where to go for assistance