Get Out of Debt

Not all debt is equal. Understanding the difference between types of debt changes how you approach it.

Secured vs unsecured

Secured debt is backed by an asset — your mortgage is secured against your home. If you don't pay, the lender can repossess. Unsecured debt (credit cards, personal loans, overdrafts) isn't backed by anything — the lender can't take your stuff without going to court, but missed payments destroy your credit file and can lead to CCJs (County Court Judgements).

Good rate vs bad rate

A mortgage at 4–5% is very different from a credit card at 29.9% APR. The rate determines how fast the debt grows if you don't clear it. A £3,000 balance on a 29.9% card costs roughly £900/year in interest if you only pay the minimum.

Debt that's different

Student loans (Plan 1 and Plan 2) in the UK are income-contingent and written off. Unless your salary will exceed the threshold for the full repayment period, overpaying is usually a waste. Council tax debt is priority debt — councils can send bailiffs without a court order. Prioritise it above credit cards.

The Avalanche Method (mathematically optimal)

Pay minimums on everything. Put every extra pound toward the highest-interest debt first. Once it's clear, roll that payment onto the next highest rate. Repeat until debt-free. This method saves the most money in interest. It requires patience — your first win might take a year.

The Snowball Method (psychologically effective)

Pay minimums on everything. Put every extra pound toward the smallest balance first. Once it's clear, roll that payment onto the next smallest. Repeat. This method creates faster wins. Research (including work by Dave Ramsey and academic studies) shows people stick to the snowball longer because early wins build momentum.

Which one should you choose?

If you have good willpower and care about total interest paid: avalanche. If you need wins to stay motivated: snowball. The best debt payoff method is the one you actually do for 12 straight months.

Before you start: build a small buffer

If you have zero savings and throw every spare pound at debt, one unexpected expense sends you straight back to borrowing. Hold £500–1,000 in cash as a starter emergency fund before aggressive debt repayment. It's not optimal mathematically, but it prevents the vicious cycle.

Automating your payments

Set up a standing order on payday for at least the minimum on every debt — then an additional payment on your target debt. Automation removes the temptation to spend first and pay later.

Negotiating with lenders

Credit card companies will sometimes reduce your interest rate if you call and ask — especially if you've been a customer for several years and have a good payment history. It takes 10 minutes and occasionally works. You can also ask about hardship plans if you're struggling — these are formal arrangements that freeze interest.