For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.


Reducing Your Debt

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

Reducing Your Debt – Complete Overview, Tips, FAQs & More

Being in debt can definitely seem like a bottomless pit. It’s very easy to fall into but extremely troublesome to get out of. 

That being said, if you live in the UK, there are a number of options you can explore in order to get your debt(s) lowered. 

In this post, I’ll be exploring these options as well as their nuances. Every debt solution is unique in the way it deals with your debt so you’ll have to be properly informed about which option to go for before you make a decision.

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Dealing with Unsecured Debt

Unsecured debt can be defined as any form of debt that has not been “secured” against any valuable asset of yours. 

An example of a “secured” debt would be a mortgage in which you put up your house as “security” for the debt. In the event that you fail to make your mortgage repayments, your house would be seized. 

Examples of unsecured debt include credit card debt, catalogue debt, etc. 

Unsecured debts are generally easier to deal with and you can also get them reduced much more easily than you would secured debts.

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How does Debt Relief Work? Can I get My Debts Reduced Using Debt Relief?

If you’re struggling to make your debt repayments, whether they be credit card debt or some type of secured debt, then making attempts to get it reduced can really help you out. 

You may think it’s not possible to get your debt reduced but you’ll be surprised at how many options you actually have. 

There are mainly two ways through which you can get your debt reduced: discretionary arrangements and formal insolvency solutions. 

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Working with Creditors

Your creditor(s) might agree to write off a portion or all of your debt depending on your financial circumstances. 

You might be able to get them to reduce your debt if:

  • Your financial circumstances dictate that you can’t realistically pay them anything at all.

If you have little to no assets and are left with no surplus income every month, then your creditor may decide that it’s not worth pursuing your debt. While this can definitely happen, you might have to produce a lot of evidence and documentation in the form of wage slips and/or bank statements in order to get them to agree.

  • Your circumstances mean that it would not be appropriate to keep pursuing you for your debt. An example of this is if you have a terminal illness, as it may not be fair to keep asking for payments.
  • You pay them a lump sum. This is known as a ‘full and final’ debt settlement offer. The lump sum amount does not have the complete amount of money that you owe. Your creditor(s) may agree to write off the remaining portion of your debt if they feel it’s not worth it to keep pursuing you for your debt through instalments.

For more details on working with creditor(s) to reduce debt, you can click here.

You can also contact your creditor(s) in order to set up a debt management plan (DMP) with them. However, please note that a DMP would mean that you’d have to pay all of your debt in its entirety. For more information on this, you can go here.

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Reducing Credit Card Debt

If you’re only dealing with credit card debt, you might be able to get it reduced without entering into any formal insolvency solution. 

The very first thing you should do when addressing credit card debt is to stop using it for any transactions if possible. 

Next, you should try calling your credit card company and explaining your situation to them. You’d be surprised at what can be achieved with a simple phone call. 

Inform them of your financial circumstances and always mention that you can provide proof and documentation of it if needed as well. 

As a result of this, your credit card provider might lower your interest rate or they might be able to give you a payment break to get your financial affairs in order. 

Another thing you can do with credit cards is transfer your balance to one with a lower interest rate in order to reduce your debt.

So, let’s talk about balance transfer and credit cards: 

The way this would work is that if you have outstanding balance on your credit card, you would transfer that balance onto another credit card that has a rate of interest lower than the one on your initial credit card. 

In this way, you would lower the amount of interest you have to pay, thus, lowering the amount of money you have to pay overall. 

One thing you have to keep in mind when using balance transfer between credit cards is the fee for transferring outstanding balance. Some credit cards have very high fees which would defeat the purpose of lowering your debt in this way. 

For more information on reducing credit card and other unsecured debt, click here.

Personal Loans and Formal Insolvency

Personal loans are a lot like credit cards since they’re both forms of unsecured debt. 

With unsecured debt, you can contact your creditor(s) and make your own informal arrangements in order to pay off your debts in a manageable way. 

However, if you feel that an informal arrangement isn’t going to work out, then you can opt for formal debt solutions to address your personal loan.

Examples of formal solutions available in the UK that you can use to address your personal loan include: 

  • Individual Voluntary Arrangement (IVA) 
  • Debt Relief Order (DRO) 
  • Bankruptcy 


An IVA is an agreement between you and your creditor(s) which states that you will make monthly payments in order to pay off debt(s) you have over an agreed-upon period of time. 

Once this period is over, any remaining debt that you have is written off. The interest rate becomes irrelevant as well since interest and charges are frozen once you enter into an IVA. 


A DRO would involve all of your debt being written off but it has strict eligibility criteria. A DRO is meant for individuals with little to no assets and very little resources to pay off debt. 

If you qualify for a DRO, your payments get frozen for a year. At the end of the year, your circumstances are assessed. If it’s determined that you’re still unable to pay off debt(s), then they are written off. 


Bankruptcy also involves all of your debt being written off. 

That being said, your assets are not protected in bankruptcy the way they are when you’re in an IVA. 

Bankruptcy would involve your valuable assets such as your house and car being seized and sold off in order to raise funds for your debt. 

For more information on how to reduce personal loan(s), click here.

Debt Reduction and Credit Scores

While it’s true that you may be able to get your debt reduced, you have to bear in mind the effect it’s going to have on your credit rating. 

You should know that whenever you opt for a formal debt solution, it gets logged in your credit file and stays there for six years. As you can probably imagine, it has a severely negative impact on your credit score. 

This means that for the next six years, you’re going to face difficulty securing any form of credit for yourself. 

Formal debt solutions such as bankruptcy, IVAs and DROS get marked in your credit record. A DMP does not get logged in your credit record but it still lowers credit scores. This is because you’re making reduced payments as part of your DMP. The reduced payments do get flagged as being part of a DMP in your credit record.

For example, if you’ve successfully completed your IVA and would like to get a personal loan, you may find that a traditional lender may not approve your application. 

You may have to go to a specialised lender that gives loans to people with low credit scores. Even then, you may only be offered a personal loan with a high interest rate or a lower amount of money than what you may have been looking for. 

Your credit rating immediately after you get out of a debt solution will be quite low but if you keep your financial affairs in order, you’ll find that it will gradually start to rise. As long as you practice financial discipline, your credit rating will be back to its former glory in no time.


There are many different ways to pay off debt in a manageable way and there are several ways to get your debt reduced as well. This is especially true if it’s a form of unsecured debt such as credit card debt. 

Just be sure to be aware of all the consequences before opting for any one debt solution.

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Are you struggling with debt?
Are you struggling with debt?
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