Start by recording each debt, including the balance, interest rate, minimum payment and payment date. Include credit cards, personal loans, overdrafts and buy-now-pay-later balances. Then list essential monthly costs such as rent or mortgage payments, council tax, utilities, food, transport and insurance.
Subtract these costs from your monthly take-home income. The amount left is your available budget for debt repayments, savings and non-essential spending. Keep a small buffer for irregular expenses, such as car repairs or annual bills, so these costs do not automatically go on a credit card.
Pay at least the minimum required on every account to avoid missed-payment charges and damage to your credit file. Direct any additional amount towards one priority debt. The highest-interest-first method usually reduces interest most quickly. The smallest-balance-first method can provide an earlier completed account and simplify the number of payments.
For example, if your monthly repayment budget is £450 and the minimum payments total £250, allocate the remaining £200 to the selected priority debt. Review the balance and interest charged each month. A payoff calculator, such as the one available through Updraft, can show how changing the payment affects the expected repayment date and total interest.
Set up payments shortly after payday and check that they leave enough money for essential bills. Compare your actual spending with the budget at the end of each month. Reduce or pause optional spending when necessary, but avoid setting a repayment amount so high that you need to borrow again before the next payday.
When a debt is cleared, transfer its old payment to the next account rather than absorbing it into general spending. Contact lenders promptly if you expect to miss a payment. Free guidance is available from organisations such as StepChange, National Debtline, Citizens Advice and MoneyHelper.