Pay off your debt

This week, we’re looking at how to pay off your debt on The Organised Life Project. The average borrower in the UK now owes £17,000. That is a huge amount of money, and debt really does hang over you.

Why pay off your debt rather than save?

Quite simply, the interest charged on debt is usually higher than on savings. You might like to have an emergency fund set aside, but Money Saving Expert always recommends paying the debts off first.

That said, some debts are heavier than others. Student loans and mortgages are almost a way of life for most 20 and 30-somethings. The interest is generally low on these and it you can also incur fines for paying mortgages off early.

How to pay off your debt

Work out how much you owe and how much your interest is

Hopefully, you know exactly how much you owe. You may also know what your fixed monthly repayments are for your mortgage or a loan.

Firstly, find the debt with the highest interest rate. This will be credit cards if you have them. if you can, transfer these to a 0% interest rate card – check out Money Saving Expert for their recommendations.

Pay off the smallest amount first

Pay off the highest interest rate first – or the smallest amount. Dave Ramsay recommends paying off the smaller amounts first, as then the amount that you have to spend increases, creating a snowball effect.

This also really helps to keep you motivated: once you start paying off the smaller debts, you want to keep going and pay off the bigger ones.

Consider getting a loan to cover all your debts and to make it manageable

Depending on the amount you owe, it may be worth you getting a loan to cover all your debts and then pay off the regular monthly payments. Work out if this will work for you: will you find it easier to pay one regular monthly payment?

Make a payment plan

You know how your circumstances may change over the next few years. Perhaps you’re planning to have another baby. Maybe you want to give up work to spend time with your children. Or perhaps you know your income will increase as your child starts full time education or you increase your income.

Plan for this. Decide how much you will pay off from each debt over the course of this year, as far as you can.

Find out how to overpay – and if you can

You may come into extra funds that you weren’t expecting. Perhaps it’s a tax rebate, or a PPI payment. If you put these extra funds towards paying off your debt, you will pay it off faster. It’s as simple as that!

However, some loans and mortgages do not allow you to overpay. Find out if you can, and if so, get it set up so that if you have unexpected income, it’s easy to do. You’ll notice the extra payments more than if you fritter it away on expensive coffee!

Ready for the next step? Find out what to do about saving.


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  • Great tips. What makes me cross is that banks will encourage you to stay in debt as we have tried to pay loans back early to be told that if we carry on monthly we will get a lump sum back at the end like cash back. Very naughty of them!

  • Great advice Naomi! I generally try to avoid getting into debt, but we have racked up some credit card lately with one thing and another. This is a really good and clear guide. I like the idea of paying off smaller amounts first. It’s so hard to keep motivated when paying off debt, rather than saving. xx