Debt is still a taboo topic amongst UK adults, but statistics show that the average UK household had an average debt of around £65,000 at the end of April 2024.
Whilst being in debt isn’t inherently bad, the way you manage your repayments is important. If you have multiple debts to different companies, it can be hard to remember how much money is going where and what the remaining balances are. Here are some tips to help you get on top of your debt repayments.
Assess your financial situation
Begin by taking a critical look at your financial situation. Make a list of your outstanding debts as well as the interest rates and repayment schedules.
Seeing it all organised and written down will allow you to understand your obligations. Having a handle on expectations from your creditors can help alleviate the pressure of the unknown and promote a healthy mindset about debt.
Create a realistic budget
Debt is a common stressor, so you may be tempted to throw all your money at it. This can leave you struggling to live, though, so a realistic budget is the way forward.
Start by sorting through your income and expenses such as bills, food and transportation. You may then be able to identify areas where you can save or cut back to leave you with a bit of extra cash. Be sure not to trim too much off and accumulate additional debt – this defeats the point of a realistic budget!
Explore debt repayment strategies
There are several different ways to pay off debts so research which one will be best for your situation.
The avalanche method is where you focus on paying off the debts with the highest interest first, reducing your overall liability. If you do choose this method, make sure you still meet the minimum repayments for the smaller amounts too.
Alternatively, you could feel the snowball method is best. The snowball method involves paying off smaller debts first before tackling the larger ones. Obviously, this means some of the debts on your initial list will be cleared quicker, but it can mean the higher interest debts accrue an additional balance quicker. However, clearing some of the smaller debts can make you feel a lot better about your situation which heightens your motivation.
Consider consolidation options
For some, managing multiple debts is simply too overwhelming and no strategies can shift that mindset.
Consolidation options are a viable choice for some, so it is worth considering if you are really struggling. Debt consolidation loans allow you to combine different debts into a single payment. This leaves you with one payment to manage rather than multiple which is easier to deal with. It may also work out that your interest rate is lower overall too.
Make sure you take time to compare different lenders as they have varying interest rates and repayment terms. You need to find a situation which works with your financial goals.
