Debt

How to Get Out of Debt in the UK: A Step-by-Step Plan

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• 4 min read
How to Get Out of Debt in the UK: A Step-by-Step Plan

The UK Debt Problem

Millions of people across the United Kingdom are carrying consumer debt — credit cards, personal loans, overdrafts, buy-now-pay-later balances, and catalogue debt. According to data from the Money Charity, the average UK household owes around £65,000 in total debt, though much of that is mortgage debt. When it comes to unsecured consumer debt, the average adult carries thousands of pounds in balances that attract high interest rates.

Getting out of debt requires a plan, discipline, and often some professional support. This step-by-step guide walks you through exactly how to do it, using UK-specific resources and approaches.

Step 1: Face the Numbers

The first and often hardest step is getting a complete picture of what you owe. Many people avoid looking at their debt because it's frightening — but you cannot tackle a problem you haven't defined.

Write down every debt you have:

  • Creditor name
  • Outstanding balance
  • Interest rate (APR)
  • Minimum monthly payment
  • Type of debt (secured or unsecured)

Include everything: credit cards, overdrafts, personal loans, store cards, buy-now-pay-later balances, money owed to family, council tax arrears, utility arrears. Total it all up. This number may be alarming, but knowing it is the start of fixing it.

Step 2: Understand the Types of Debt

Not all debt is created equal. Understanding the difference will help you prioritise:

Priority Debts

These carry the most serious consequences if unpaid and should always be addressed first:

  • Mortgage or rent arrears (risk of losing your home)
  • Council tax arrears (bailiffs, magistrates court)
  • Gas and electricity arrears (supply cut off)
  • TV licence (criminal prosecution)
  • Court fines
  • HMRC tax debts

Non-Priority Debts

These are serious but carry less severe immediate consequences:

  • Credit cards
  • Personal loans
  • Overdrafts
  • Store cards
  • Buy-now-pay-later balances

Step 3: Get Free Debt Advice

Before you do anything else, consider speaking to a free debt adviser. In the UK, you have access to some of the best free debt advice services in the world:

  • StepChange Debt Charity: The UK's largest debt charity, offering free advice online and by phone. They can help you create a debt management plan.
  • Citizens Advice: Free, confidential advice on debt, benefits, and money. Available in person, by phone, and online.
  • National Debtline: Free advice by phone and online factsheets covering every type of debt situation.
  • MoneyHelper: The government-backed service that can signpost you to appropriate help.

These services are free, confidential, and staffed by trained advisers. There is no shame in using them — they exist precisely for situations like yours.

Step 4: Create a Budget and Find Extra Money

To get out of debt, you need to pay more than the minimum each month. That requires finding extra money in your budget. Start by tracking every pound you spend for one month. Then ask:

  • Which subscriptions can I cancel? (Streaming services, gym memberships, apps)
  • Where am I overspending on food? (Switching supermarkets to Aldi or Lidl can save £50–£100 a month)
  • Can I reduce my energy bills? (Draught-proofing, LED bulbs, lower thermostat)
  • Are there any benefits I'm not claiming?
  • Can I sell anything I no longer need?
  • Can I take on any extra work, even temporarily?

Step 5: Choose Your Debt Repayment Strategy

There are two proven approaches to paying off non-priority debt:

The Avalanche Method (Mathematically Optimal)

Pay the minimum on all debts, then put every extra pound towards the debt with the highest interest rate. Once that's paid off, move to the next highest rate. This method saves the most money in interest over time.

Example: If you have a credit card at 29.9% APR and a personal loan at 9.9% APR, throw everything extra at the credit card first.

The Snowball Method (Psychologically Powerful)

Pay the minimum on all debts, then put every extra pound towards the debt with the smallest balance. Each paid-off debt gives you a motivational win and frees up cash to accelerate the next debt.

Research suggests the snowball method may be more effective in practice for many people, because motivation is often the limiting factor, not mathematics.

Step 6: Consider Balance Transfers and Consolidation

If you have good credit, a 0% balance transfer credit card can save significant interest while you pay down debt. Many UK providers offer 0% periods of 18–24 months. Transfer your high-interest balances and commit to paying off the full amount before the 0% period ends.

Debt consolidation loans can also simplify multiple debts into one monthly payment at a lower interest rate. However, be cautious: extending the repayment period can mean you pay more interest overall, even at a lower rate. Use a loan calculator to compare the total cost.

Never consolidate unsecured debt onto a secured loan (such as remortgaging to pay off credit cards) — you risk losing your home if you fall behind.

Step 7: Negotiate With Creditors

Many people don't realise that creditors will often negotiate. If you're struggling, contact your creditors directly and explain your situation. Options they may offer include:

  • A temporary payment freeze
  • A reduced interest rate
  • A payment plan based on what you can genuinely afford
  • A partial settlement (for defaulted debts)

Under the FCA's Consumer Duty rules, lenders are required to treat customers in financial difficulty fairly. Don't be afraid to ask.

Step 8: Protect Your Credit Score While Repaying

As you repay debt, try to maintain at least the minimum payment on all accounts to avoid missed payment markers on your credit file. Check your credit report with Experian, Equifax, and TransUnion (all offer free access) to ensure everything is accurate.

Formal Debt Solutions

If your debt is severe and unmanageable, formal solutions may be appropriate:

  • Debt Relief Order (DRO): For those with debts under £30,000, low assets, and low income. Freezes debts for 12 months, then writes them off. Fee: £90.
  • Individual Voluntary Arrangement (IVA): A legally binding agreement to repay a portion of debt over 5–6 years. Works best for debts over £10,000.
  • Bankruptcy: A last resort that writes off most debts but has serious consequences for credit and assets.

Always take free advice from StepChange or Citizens Advice before pursuing any formal solution.

Staying Out of Debt

Once you've cleared your debts, the most important thing is to build habits that prevent a return to the same situation: maintain an emergency fund so you never need to reach for a credit card; use a budget to ensure you're living within your means; and if you use credit cards, pay the balance in full every month.

Getting out of debt is hard work, but it is absolutely achievable. Thousands of people do it every year in the UK with the help of free advice services and a committed repayment plan. You can too.