How to pay off debt quickly: 7 tricks you should know, including the ‘avalanche method’

MANAGING your finances is not just about knowing the right way to do it.

It’s important to find the right method that works for you.

We explain all the different ways you can clear your debt quicklyCredit: PA:Press Association

If you’re in debt then it can feel overwhelming to know where to start.

But it’s much easier when you’re encouraged by others in the same situation.

Our Fix Your Finances series is here to help you get out of debt – but also to make Sun readers richer.

Today, we reveal some tried and tested techniques to tackle debt.

FIX YOUR FINANCES

THE SUN’S Consumer Crew series is here to help you Fix Your Finances.

We want to help make you richer in 2021 by transforming your finances.

As always, we will fight your corner. Next week our our Consumer Crew panel will also be on hand to help answer your money questions or problems.

Send your questions to: [email protected]

The debt snowball method

One of the challenges of trying to repay debt is overcoming the feeling that the mountain is too big to climb.

The snowball, something that starts off small, but as it rolls on gathers momentum and gets bigger, is a method where you start with your smallest debts first, gaining motivation by ticking off bills owed or accounts closed.

The small wins should spur you on to tackle bigger debts.

The downside of this is that it can cost you more over time because some of your bigger debts might have higher interest rates.

If you are feeling inundated with requests for repayment, however, just starting somewhere may incentivise you to pay all your debts off more quickly.

How I paid off £30,000 debt using the snowball method

SINGER Rhiannon Llewellyn and her husband Brutus, a vicar, who live in London started paying off £30,000 using the snowball method, repaying the smallest amounts first.

They built up the debt when buying a car and sofa on finance and using credit cards.

“In theory we paid off more interest than would have done focusing on the highest interest rates first,” says Rhiannon, “but it made the most sense to us.

“Most people don’t get into debt because they’ve got a problem with maths, they get into debt because they’ve got a problem with their behaviour.

“By paying off smaller parts and building up our confidence and stamina, in the same way you would if you were running a half marathon and you’d never run more than for a bus, we managed to clear our debt more quickly than we would have done otherwise.”

They cut back on spending inspired by tips Rhiannon gleaned from watching hours of Youtube videos of women money experts sharing their household budgets, talking about how they had worked their way out of debt.

Rhiannon added: “I made it a backing track to my life, putting on a video every time I cooked. “Eventually I started to change my behaviour.”

The couple are now debt free, and Rhiannon shares her journey, and budgeting advice on Instagram, as part of the debt-free community at @thevicarswifesfrugallife.

When it comes to money, most of us don’t want to talk about it, Rhiannon believes.

She adds: “We’re more likely to know about a girlfriend’s favourite sex position than what’s on their credit card statement.

“I think what people find really useful about the debt-free community online is that they can be really open about their finances, even if they stay anonymous.

“You get that support from other people doing similar things, who don’t think you’re crazy or penny pinching.

“It is inspirational, and makes you feel that all the micro decisions you make every day to cut back do add up.”

The debt avalanche method

This is the opposite of the snowball method.

Look at who you owe and focus your attention and spare money on repaying the debts with the highest rates first, as these will be costing you the most.

This way of repaying may be less satisfying if the most expensive debts are also the biggest, it will take you longer to close accounts or tick a debt off the list, but you will save more in interest.

With both the snowball and avalanche method make sure that you consider which bills are “priorities” too, don’t ignore your council tax because you’re tackling your credit cards.

You should always meet the minimum payments on all your debts, especially those that will cost you your home, or potentially risk criminal prosecution, if you fail to pay on time.

0% balance transfer cards

If you are chipping away at credit card debts paying only minimum payments at high interest rates (the average is about 17.5% according to the Bank of England) you will save a significant amount by moving them to a 0% balance transfer card.

These offer you a period of time, the longest card gives you 29 months, to repay your debt without having to repay interest, too.

Beware that the rates and fees can be high on these cards if you don’t manage to clear the full balance in the 0% period.

You may also have to pay a transfer fee of a few percent of your debt, but this still works out as much cheaper than the cost of interest on a normal credit card.

Compare cards using websites like MoneySupermarket.com and ComparetheMarket.com.

How to cut the cost of your debt

IF you’re in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.

Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money

Work out your budget – by writing down your income and taking away your essential bills such as food and transport
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs

Pay off more than the minimum – If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker

Pay your most expensive credit card sooner – If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)

Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them

Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don’t pay

Get advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further

Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans

Debt forums

Us Brits hate talking about money, and there is a particular silence around debt.

It can make it difficult to share your feelings about yours, or seek advice from others in a similar position.

This is where debt forums come in. Money Saving Expert’s Debt Free Wannabe forum is one of the most popular, where people log on to discuss their debts, share advice and tips on repaying them and seek accountability.

Like agreeing to go to the gym with a friend to make it harder to get out of it, so posting your debts for others to see, making public promises to reduce them, can help you keep it up when the going gets tough.

The Debt Free Wannabe Forum has group challenges, such as “pay your debt off by Xmas 2021”, where you are encouraged to post the amount of debt you have, the amount you have paid off and your target.

These are added to a spreadsheet along with regularly updated percentages showing how close you are to meeting your goals.

Those who join the challenge say it is incredibly motivating to see everyone clearing their debts a bit at a time and some eventually becoming debt free.

Debtstagrammers

In 2020 we saw the rise of the Debstagrammer, people posting their debts, often anonymously, on their Instagram feeds, to hold themselves accountable and to inspire others to pay down their debts, too.

The hashtags #debtfreecommunity and #debtfreejourney have over 2million entries.

You can post your own debts and your plan on how to reduce them, or just use others’ journeys for motivation and money saving tips.

The advice is non-judgemental as it is coming from people dealing with their own debt.

Many say that “going public” has forced them to be honest with themselves and has given them a space to celebrate when they start to get on top of their finances.

Budgeting apps

How much debt you can afford to pay off and how quickly depends on how much money you have got coming in, any savings and other bills you have to meet.

You need to draw up a budget to make sure you are setting yourself realistic goals.

It is much easier to do this using one of the new budgeting apps that will help categorise your outgoings.

Apps such as Moneydashboard, Yolt and Emma help you see all of your accounts in one place so you get a good overview of your finances, and will highlight any recurring payments or subscriptions that you had forgotten to cancel but are costing you money you could use towards your debts.

The app IFTTT pairs with Monzo to help you set savings challenges, such as moving £1 a day into a separate pot that you could use towards getting yourself out of the red.

Debt charities

If you are really struggling with unmanageable debts, or would like anonymous advice from an expert, seek out a debt charity.

There are lots of services offering to help you debt counselling and consolidate loans, but many charge high fees and are best avoided.

Charities such as StepChange offer free debt consolidation services, online or over the phone, and will help guide you through the best way to manage what you owe no matter how big or small.

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