5 tips on dealing with debt

11 August, 2025

Firstly, debt isn’t necessarily a bad thing in itself. It’s a very useful way to manage household budgets and buy things you need today and repay over a period of time.

Problems arise when the amount of debt becomes unsustainable, which can happen for many reasons. Losing a job, the death of a loved one or a severe accident or medical condition are all potentially life-changing circumstances. Events like these can affect people’s ability to repay even relatively modest debt levels, which can then quickly balloon due to missed payments and penalties.

According to 2024 findings from professional services firm PwC¹, the total amount of unsecured household debt is now over £400bn – a record high. This equals an average £14,300 per household. So, if things start to get tricky, what can you do to tackle the problem?

The temptation is to ignore your debt, but denial is not the answer! This will simply make things worse. You need to approach the situation directly and be smart about how you deal with it.

These five tips will help you tackle your debt directly.

1. Face the financial facts

Start by making a list of all your debts, putting those with the most serious consequences at the top. These are likely to be debts affecting your home, such as unpaid rent, bills or council tax. Further down the list will be money owed on credit cards, overdrafts, or hire purchase agreements.

Prioritising your debts will help you plan how to manage them. However, it is still important to always consider the consequences of non-repayment, so always try to at least make the minimum payments each month.

2. Work out a budget

Once you have a clear picture of how much you owe, you can draw up a budget plan. The Moneyhelper Budget Planner² can help you work out where your money goes each month, and calculate what’s left over once the bills have been paid.

This will give you an amount that can go towards your monthly debt repayments. It’ll also help highlight areas of spending you might be able to cut back.

3. Consolidate debts

Consolidating debts may help simplify repayments and save money if you use a loan or credit card with a low APR. There are a couple of options.

Credit card balance transfers

These can really help reduce the cost of borrowing. By transferring an existing credit card balance to a new lower-rate card, you can avoid additional charges and clear debt faster.

If you’re confident you can pay the full amount relatively quickly, you could switch to a credit card offering 0% interest for a limited time, often 12 to 24 months.

However, be aware of potential transfer fees and the terms and conditions of the offer.

Take out a personal loan

The annual percentage rate (APR) on personal loans is usually lower (sometimes considerably lower) than on credit cards. It also helps to have a single monthly payment to manage rather than several.

4. Prioritise your debt payments

For debts you can’t consolidate, there are a couple of ways you can look to tackle them one at a time, while remembering to keep up the minimum payments on all of them.

Debt snowball

This strategy looks to pay off the smallest balances first.

Allocate enough money to make the minimum payments for each debt. Then, use all the remaining repayment budget to pay off the smallest debt. Once repaid, reallocate this to the next smallest debt. Repeat until all debts are repaid.

Taking this approach shows quick results and can give a psychological boost. It also means each time you pay off a debt, you can roll the payments into the next – the snowball effect. So, by the time you get to the largest debt, you can pay it off quicker. However, in the long term, it may take longer and cost more in interest than the debt avalanche strategy.

Debt avalanche

This strategy looks to pay off the most expensive debts first.

Having allocated enough money to make the minimum payments for each debt, use the remaining repayment budget to pay off the debt with the highest interest rate. Once this debt is paid off, reallocate your remaining budget to the debt with the next highest interest rate. Repeat this until each individual debt is repaid.

An advantage of this method is it reduces the total interest paid. However, it needs discipline, as it may feel like you’re not making progress in the early days. This is especially true if the debt with the highest interest rate is also the largest.

5. Seek advice

If you’re feeling overwhelmed or you’re not confident about the next steps, you aren’t alone and help is always available. Get in touch with an independent professional organisation such as the National Debtline³ or Citizens Advice⁴. They help thousands of people every day to manage their debts.