How to get out of debt?
Finding yourself in debt can seem overwhelming. Sometimes, the cycle can seem endless, but, fortunately, there are ways to reduce the amount you owe. It takes a little bit of time and patience, but if you take it step by step, you can get back on track with your finances.

In this article, we'll explore applying ways to help you get out of debt, such as how to:

  1. Work your way out of a debt spiral

  2. Develop a debt repayment strategy and prioritise your debts

  3. Freeze interest & charges of non-priority debts

  4. Work out how much to pay each creditor

  5. Reduce credit card debt quickly

  6. Investigate how debt consolidation loans can help

What is a debt spiral?
Some debt is unavoidable — for example, a mortgage or loan to pay for emergency car repairs. However, over time, the amount you owe can pile up. Loans and credit cards with high interest rates can lead to a seemingly insurmountable cost to repay, that only seems to continue to grow. For example, payday loans can be a tempting but dangerous option, with interest rates of up to 1500%.

You may even find yourself taking out multiple credit cards or loans so you can cover repayments from other debts. This is known as a debt spiral.

The process of getting out of a debt spiral can seem daunting. However, developing a debt repayment plan can help you successfully reduce the amount you owe and put you in good stead for healthy money management in the future.

It's also helpful to reexamine any financial behaviours or beliefs that may have led to your debt in the first place. Organisations like National Debtline and StepChange, as well as Citizens Advice, can provide you with free, impartial advice.
Create a Debt Repayment Strategy
To get out of a debt spiral, it's vital to come up with a plan to help you pay back the money you owe and develop positive financial habits that will help you stay debt-free.

  1. Firstly, it's helpful to list everything you owe. That way, you can assess exactly where you stand, how much you need to repay, and which debts need repaying first. When listing your debts, include your mortgage, any student loans and vehicle loans if applicable. Note down interest rates and monthly payments for loans and credit cards, too
  2. Next, prioritise which debts to pay first. This step is essential for ensuring you don't end up owing more due to missed or late payments or risk legal trouble. Priority debts are the most important ones to pay. They can include things such as your mortgage payments, parking tickets or court fines — anything that could have a negative impact on your life beyond finances.
  3. Once you've listed all your debts, work out how much you can afford to pay each month. To do this, make another list of all your non-debt expenses, such as your monthly food shop, phone bill, fuel purchases etc. This will leave you with your 'available income'. Try to be as accurate as you can and keep a copy of this budget in case you need to show it to creditors when negotiating lower repayments. There may be ways you can create more available income — for example, by preparing meals at home rather than buying lunch out so much.
If You Can't Pay Non-Priority Debts
You may find that you have no available income after paying monthly expenses and priority debts. In this situation, you can contact creditors of non-priority debts and ask them to freeze your interest and charges. You'll need to explain your financial situation and show them evidence, but they may be willing to help out so that your debts won't increase. This reprieve will give you the chance to get back on track with priority debts.
Work Out How Much to Pay Each Creditor
If you have available income and multiple debts, the next step is to decide how much to pay each creditor. Here, it's best to prioritise again — how much do you owe each one and which loans or credit cards have the highest APR? APR can be the best representation of the total cost of your loan as it takes into account interest rates and any additional fees.

You don't have to pay each creditor equally. Instead, focus on those which are racking up the most debt.

You can write to your creditors with your repayment offer. Include your budget so they can see your financial situation. Explain the reason behind your debt, show that you have a repayment strategy in place and ask them to freeze any interest and charges on the proviso that you continue to pay the amounts you've suggested.

Your creditor may ask you to pay more than you've offered. Make sure you don't agree to pay more than you can afford — this may lead to more of a debt spiral!
Ways to Reduce Credit Card Debt Quickly
Credit cards are notorious for causing mounting debt. Fortunately, there are ways you can reduce your credit card debt to help you get out of a spiral.

Firstly, with any credit card, it's vital to make your monthly repayments. Missed or late repayments can damage your credit score. If your debt means you can't afford these repayments, you can ask your credit card issuer for a lower rate. As previously mentioned, always pay the most expensive credit card first.

If you have available income, then paying back more than the minimum repayments can significantly reduce your debt meaning you'll have a less interest buildup. Even increasing your monthly repayments by a very small amount can make a massive difference.

For those with a good credit rating, transferring your balance to a 0% interest card can help you whittle down your debt as you won't need to worry about interest building up. However, a 0% interest rate is most likely introductory and will increase after 12-18 months, so this is only a viable option if you know you can pay your debt off in that timeframe.
Debt Consolidation Loans
Another option that can help you reduce your credit card debt (or other debts) is to consider debt consolidation loans. A debt consolidation loan enables you to merge multiple high-interest debts into a single debt with lower interest. Although it doesn't lower the core amount you owe, it can reduce the amount of interest you pay over time.

Debt consolidation loans give you the chance to focus on paying the principal debt without having to worry about owing high interest.

At Fintern, we offer low-interest loans that can help you repay other forms of debt and get back on track. We can lend between £1,000 and £7,500 at Representative 18.8% APR (variable) over a course of up to three years.
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