Managing debts

The information in this guide was last updated on 08/01/2016

It’s easy to lose sight of your finances, and many people in the UK fall into debt at some point. Losing a job, family needs, illness and simply overspending day-to-day are all common causes of debt. In this guide you’ll find tips for how to manage debts, whether it’s on credit cards, store cards, utility bills, loans or overdrafts.

Dont ignore debt

It can be tempting to ignore your debts, but sadly debts don’t go away on their own. The good news is that help is available if you’re not sure how to get your finances back on track.

First, take stock of your debts. List all the people and companies you owe money to. Include as much information as you can, including what payments are due and when, and gather any paperwork together.

Prioritise your debts

  • Priority debts are those where if you don’t pay you might lose your home (like your rent and mortgage payments), any essential goods and services you need (like a car to get to work or your gas or electricity) and your council tax, VAT or any magistrate court fines. The impact of not paying these can be serious, so it’s important that you pay these before you repay any other debts.  
  • Non-priority debts are less urgent, but you’ll continue to pay interest and charges can mount if they aren’t paid back. They can also affect your credit rating and ability to get credit elsewhere. Examples include store cards, overdrafts and unsecured personal loans. 

Start taking action to manage your debt

  • A budget will help you see what you’re spending and plan realistically. See how to create a budget 
  • If you have any savings, use them to pay off your debts. You should always prioritise debts over savings, because the amount of interest you’ll be paying on your debts will be higher than any interest you earn.

  • Cut back on spending; remove temptation to spend by only carrying cash when you go out. You can also block your favourite shopping websites on your computer’s browser.

  • Increase your income; could you increase your hours at work, or take a part-time job? Another option is to rent out a spare room or storage space in your house...but you’d need to consider the tax implications of increasing your income and check with your mortgage provider or landlord before renting a room.

  • Shop around for cheaper rates on credit cards and other loans so you can move your debts and pay less interest. But look out for early repayment charges and/or exit fees or short-term offers on interest rates which later increase.


Handling debt

Download our Handling debt guide - it provides an easy, step-by-step guide to make an honest assessment of all your debts.

If you're struggling financially, we can help you get yourself back on track. View our money worries page to find out more.

Money worries

Talk to your creditors

It’s essential to talk to your creditors about your debts. The longer you leave it, the more likely it is they’ll contact you. If they don’t hear from you, they may ask a debt collection agency to contact you or even start legal proceedings.

Most lenders will be experienced in dealing with debt, and may be able to offer ways to help, such as repay what you can at a rate you can afford. Many lenders subscribe to The Lending Code, which means they’re committed to dealing sympathetically with people having payment difficulties. Find out more about The Lending Code.

When you get in touch with a lender, explain who you are, what the situation is and why you are struggling to pay your debts. Be realistic about the amount you can pay back, and don’t agree to pay more to one creditor at the expense of another – remember you have to plan for all your debts, and put your ‘priority debts’ first. When you come to an agreement, make sure you get it in writing from them.

Ask for help to manage your debts

Many companies offer easy, instant debt solutions, but these are often too good to be true. Names can be misleading, so make sure the organisation you choose is a charity. Other companies may charge fees. Here are a few free sources of help and advice if you’re having trouble with debts:



If you contact these charities, give the adviser as much information as you can about your household’s financial situation, including your list of creditors and a list of your incomings and outgoings.

Consider a debt management plan

A debt management plan is an informal agreement between you and your creditors where you make lower monthly payments than you currently owe. 

Debt management plans are only suitable for non-priority loans. They are set up by a third party – usually a debt charity or a debt management company – who will agree the payments you make to your creditors. Some debt charities won’t charge fees for this service, but debt management companies will, so it’s advisable to think carefully before using one. Using a debt management plan can also affect your credit rating – you’ll be making smaller payments than originally agreed and this will go on your credit record.

If you’re going to get a debt management plan, only use a company that’s authorised by The Financial Conduct Authority.


Make a fresh start

It’s understandable if you want to put your experience of debt behind you. But there are some useful lessons you can learn from getting into debt, like how to manage your money better in future.

Debts will have an impact on your credit rating, affecting what you can borrow in future. To help look after your credit score make sure you pay bills on time and keep a close eye on all your accounts.