No debt problems are unsolvable. It might not be easy or quick, but there’s always a route. And the earlier you deal with ’em, the easier they are to deal with.

Debt isn’t just a finance issue. It feeds into all elements of your life. This guide covers wide and varied solutions, from cutting interest costs to budgeting, or simply getting free one-on-one debt help.

Are you in debt crisis?

There are two ways to deal with problem debt. Which one is right for you depends on whether you’re in what’s technically defined as debt crisis, or if you just have worrying or large debts.


What counts as debt crisis depends on who you ask. There’s a strong indication if you answer ‘yes’ to either of these…

Are you struggling to pay all basic outgoings, eg, mortgage, rent, energy bills and credit card minimums?

– or –

Are your debts (excluding your mortgage) bigger than a year’s after-tax income?

Even if your debts are big: if you can service them, even at the minimum level, you’re not in debt crisis and a different solution applies.

Before you start

No one ever wants to get into debt. It comes from spending money you don’t have. This could be for frivolous reasons, or you may’ve had a horrible change in circumstances, like a partner dying, personal illness, divorce, mental health problems or losing your job (see our full Redundancy guide for hints and tips if you have lost your job).

Yet however good or bad your reason, from now on it’s irrelevant. The most important thing you can do is get a disciplined handle on your spending.

Debt’s a symptom, not the problem. Before tackling it, you must reduce your spending. Not only to stop you borrowing more, but to maximise repayments.

The prime aim of this guide is to cut the cost of your debts, yet if you do that without examining the bigger picture of all your spending it’ll be wasted (there are some top tips later on to help).

That’s why, in this guide, my prime focus is on cutting the cost of your debts themselves, rather than looking at the bigger picture of all spending.

How bad are your debts?

If you’re wondering how bad your debts are, as the old adage says, size isn’t everything. What counts is your debt in proportion to your ability to repay.

Are your non-mortgage debts bigger than a year’s after-tax salary?

If your non-mortgage debts (usually credit cards and loans) are more than a year’s salary after tax, then they’re quite severe. After all, that means you’d need to work more than a year to repay them, even if you had no outgoings.

Yet even if your debt is manageable, if you don’t know where it came from, that’s a big danger signal. Compare these two answers:

  • So how did you build up debts of this size?

    “Well I planned for and budgeted, shopped around to get the cheapest borrowing in order to buy a car/conservatory/caravan and now we’re repaying it.”

    …and compare that with:

  • So how did you build up debts of this size?

    “Well I’m not sure really, I just used my credit card and the cost built up.”

    The latter is, of course, the most worrying. It means you are spending more than you earn and using borrowing as a means to fill the gap.

    If you continue to do that, you’ll get in a debt spiral.

    Never borrow more

    Traditional debt help says ‘never borrow your way out of a debt problem’. But this ignores the varying cost of different debts.

    The MoneySaving approach is: “Never borrow more to get out of a debt problem.”

    If it’s possible to borrow more cheaply elsewhere to replace existing borrowing, then this can provide a huge boost, as lower interest rates mean more of your cash goes towards repaying the actual debt rather than just servicing the interest.

    Those with big debts may save in interest by being more savvy with their borrowing.



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