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


Reducing Personal Debt – Everything You Need to Know

Reducing Personal Debt

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

If you’re falling behind on payments for personal loans you may have taken out, you may be confused about how you’re going to pay the money back. 

While personal debt is relatively easier to deal with than other forms of debt, it’s still something that needs to be addressed with a well-planned approach. 

Today, I’ll look at how you can effectively reduce the amount of personal debt you have to pay back as well as how you should pay back the remaining debt.

Addressing Credit Card Debt 

The debt on your credit card can be especially tricky because if you don’t keep a constant check on it, it can quickly spiral out of control. 

Use Your Credit Card for Essentials Only if You Can

I always advise people to only use their credit card for essential spending such as for fuel, groceries, etc. 

It’s also a good rule of thumb to only use your credit card on items for which you could also alternatively pay with cash on the spot. 

Using these rules can allow you to keep yourself in check so your credit card balance doesn’t get too high to handle. 

On the other hand, if the outstanding balance on your card has already reached a point where it’s starting to become unmanageable, then there are a few things that you can do. 

Credit Cards and Balance Transfers

The first thing you should do is switch to a 0% balance transfer credit card. This might be difficult if you have accrued a lot of personal debts since because of this, your credit score will most probably be low. 

If you have a close friend or relative that you trust who has a credit card with 0% interest, you could ask them to transfer your outstanding balance onto their credit card. 

This would allow you to pay off your outstanding debts at a 0% interest rate. Paying off your credit card debt with no interest can save you an enormous amount of money. 

Just be sure to keep transfer fees on the credit cards in mind. 

Credit Cards and Interest Rates

Secondly, you should always look for a lower interest rate and reject any increases in your credit card APR in order to pay off debt economically

You will usually be charged interest by your credit card company if you withdraw money from an ATM using your credit card or if you pay off any item with less than the full amount mentioned on your statement. 

When it comes to interest rates, if your credit card company decides to increase it, they are obligated to contact you at least 30 days in advance. This is to give you time to decide what you want to do. 

You will be given 60 days to reject the rise in the interest rate, cancel your credit card and pay back the money you owe at the old rate. 

credit scores guide website way

Credit Cards and the Minimum Payment

Your minimum payment is the lowest amount that you’re expected to pay back to your card company each month in order to avoid a fine or a penalty. 

While it’s true that it’s not always a bad idea to just pay the minimum amount if you’re struggling with your finances, you mustn’t make a habit of this. 

This is because if you keep paying the minimum amount, it will take you a long time to pay off debt in its entirety. As a result of this, you will have paid a much larger amount of money in the form of interest. You may even get stuck in persistent debt if your debt starts to increase faster than you’re paying it off. 

Addressing Personal Loan Debt

Personal loans can get tricky to deal with because of their high interest rate(s). 

Switching Lenders

You may be able to change your personal loan to a lender that charges you a rate lower than your current one. It’s important to note that you may need to do some calculations to be sure whether this move is completely worth it or not since you’ll probably have to pay a redemption fee to your old lender.

Getting a Debt Consolidation Loan 

A debt consolidation loan is one where you take out a single loan to address all of the other debts you have. 

It’s a good idea to get a debt consolidation loan with a lower rate of interest so that you can effectively lower your monthly payments

Not only that but a debt consolidation loan also means that you’re now only answerable to a single creditor rather than a group of creditors. 

A debt consolidation loan is not really worth it if it has the same rate of interest as your current personal loan(s) or higher.

It’s important to note that if you’re struggling to manage payments on your current personal loan, then you might also have problems sticking to payments for the new loan as well. 

Make sure to get free debt advice from an organisation before you opt for a debt consolidation loan. 

For advice on how to repay personal loan debt and other financial issues, you can contact independent debt charities operating in the UK such as Stepchange and Payplan.

Getting a Personal Loan from a Credit Union

If you need a personal loan, getting it from a credit union in the UK is an extremely good option. 

This is because unlike credit cards and traditional personal loan lenders, credit unions offer extremely competitive rates of interest on amounts of up to £3,000. They are also happy to offer smaller amounts as part of loans as well.

A loan you get from a credit union also does not have any set-up fees, administration costs or redemption fees. 

Most credit unions you’ll find will cost 1% a month on the reducing balance of a loan. That’s an APR of 12.7%. 

By law in the UK, credit unions can charge no more than 3% of the reducing balance of a loan per month. That’s an APR of 42.6%. 


There are a number of ways to pay off your debts but sometimes, that’s not enough. 

At times, you have to pay off debt while simultaneously making efforts to reduce the amount of money you actually have to pay back. 

Take control of your finances, assess them thoroughly, seek the proper debt advice and you’ll get out of debt in time.


Are you struggling with debt?
Are you struggling with debt?
  • Affordable repayments
  • Reduce pressure from people you owe money to
  • Stop interest and charges from soaring