How to save Best ways to pay off existing debts

Decide which debt is the most expensive, and pay this off first

After you've looked closely at what your outgoings are and decided which you can do without, you may find yourself with some spare cash at the end of the month.

Rather than start saving straight away, use it to pay off some of your debts, pay off some of your overdraft or pay a little more off your bill. 

Be aware though that some lenders will penalise you for paying off things such as mortgages early, so check your terms and conditions to make sure you won't get stung for an early repayment fee. 

Prioritise debts

First, you need to decide which debt is the most expensive and use the surplus to pay this off. Apart from mortgages, your next priority could be your store card, which often has a comparatively highest interest rate, so you may want to clear this first.

Loans for small amounts – under £5,000 – are often more expensive than those for larger sums, and although it's definitely not generally good practice to pay off debt with more debt, switching the loan to a cheaper type of lending such as a may work out better in the long run. See our Best Rate personal loans for the best rates.

Also before applying, consider how much the loan will cost you at different interest rates: eg: a £5,000 loan over three years with a 6% interest rate would generate £463 in interest, a 7% rate loan over the same period would cost you £77 more. 

Minimum repayments

If you're only making the minimum repayments, you could be paying more in interest than you would if you're able to afford a bit extra each month, which would clear the bill earlier. 

Use our credit card repayment calculator to find out how long it will take you to pay off your balance, and see our table to help you make the right choice.

Coping with debt

If your debts are becoming unmanageable, first of all talk to your bank. 

You could also call the Consumer Credit Counselling Service or National Debtline, which provide free practical advice on how to manage debt, or click through to the Which? guide to managing debt.