8 ways to tackle your debts in 2024

With the base rate rising to a 15-year high of 5.25% in 2023, borrowing got a lot more expensive.

The average interest rate households paid on credit card debt, for example, hit 23.89% in November, according to Bank of England data. This is up from 21.96% compared with the same month in 2022. 

Meanwhile, data from Moneyfacts shows the average two-year fixed-rate mortgage was 2.34% in December 2021 compared with 6.04% in December 2023.

Here, we set out eight ways to tackle your credit card, overdraft and mortgage debts, if you’re starting the new year worried about keeping up with repayments.

1. Prioritise your debt

Jot down all the credit card, store cards, loan, overdraft and mortgage debt you have, and how much you owe on each as well as how much interest you're paying.

If you have a 0% deal with seven months left and a card charging higher interest, it’s worth trying to clear the more expensive debt first. 

• Find out more: how to pay off your debts.

2. Cut your household bills

One way to free up a bit more money in your budget to help you tackle expensive debts is to check if you can make savings on your outgoings.

For example, there are 4.3 million UK households that are eligible for broadband social tariffs, but less than half are aware of the savings.

The discounted deals are available to customers in receipt of benefits such as Universal Credit and start at just £12 per month. They also aren’t subject to annual price rises unlike many other broadband tariffs.

• Find out more: 6 household bills going up in 2024 and how to manage them.

3. Pay more than the minimum

One small step you could take with the extra money in your budget is to fix a set amount to pay each month on your credit card rather than the minimum amount. 

This is because the minimum payment on a debt is usually charged as a percentage of your balance, which means you pay less as your debt goes down.

• Find out more: credit card repayment calculator.

4. Consider a 0% balance transfer credit card

If you're paying so much interest on credit card debt that upping your monthly payment has little impact, you could move it to a 0% balance transfer card.

This type of deal gives you the chance to pay the debt down faster and save money, as all your payments will go towards the debt rather than the debt and interest.

The best deals offer almost 30 months interest-free, but watch out for the balance transfer fee, as some deals charge nothing while others come with a 4% fee for moving a balance over from a card. 

• Find out more: best 0% balance transfer credit cards 2024.

5. Switch to a cheap or free overdraft...

An overdraft can be a useful credit facility, but most banks will charge you interest if you dip into it. 

While Which? Recommended Provider Starling offers the cheapest overdraft rate on the market at 15%, this is only available to customers with an excellent credit score. Without this, you may be charged at 25% or 35% EAR.

First Direct offers an interest-free overdraft of £250 on its standard current accounts. However, if you borrow more than £250, you'll pay 39.9% EAR.

Nationwide's FlexiDirect account offers an interest-free overdraft for a year, but after this period you will be hit with a rate of 39.9% EAR.

• Find out more: best bank accounts for overdrafts 2023.

6. ...or try a 0% money transfer credit card

A 0% money transfer credit card can help you tackle a big overdraft debt.

That's because this type of credit card deal allows you to shift money from your credit card to your current account interest-free for a set period with a one-off money transfer fee.

• Find out more: best 0% money transfer credit cards 2024.

7. Plan for higher mortgage payments

Nearly half a million homeowners are coming off fixed-term deals over the Christmas period, and are likely to see their monthly payments rocket as mortgage rates have soared due to consecutive base rate hikes.

If you're very near the end of a fixed term, start shopping around for a new deal now. You can usually secure a new mortgage six months before the end of your current one.  

Alternatively, if you're struggling to meet your monthly payments and switching isn't an option, contact your lender. They can explain your options, which could include deferring a payment, increasing your mortgage term to help reduce your monthly payments or switching to an interest-only deal for a period.

If you're on certain benefits, such as Universal Credit or pension credit, you might qualify for a Support for Mortgage Interest (SMI) loan. This is a loan from the government that will pay the interest on up to £200,000 of your mortgage, direct to your mortgage lender. However, you'll have to pay back this loan, usually when you sell, and you'll be charged interest.

• Find out more: read our guides for step-by-step information on what to do if you can't pay your mortgage.

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8. Get free advice 

If your total debts (excluding a mortgage) add up to more than you earn in a year, you don’t quite know where or why you have these debts, or you’re struggling to repay them, you may well have problem debt.

There are a few organisations and charities that offer free, impartial debt help and advice. Some advice may be face-to-face, some over the phone and some online.

If you can't afford the repayments on existing debt, it's better to get free independent advice rather than dipping further into financial trouble by using fee-charging debt-management companies.  

• Find out more: free debt advice contacts.

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