Pay off Your Debt: a Step-By-Step Approach

Many of us are familiar with the challenges of debt. In fact, more than six million Britons believe they will never be debt free.1 This ominous feeling is not without merit — new research has found that the average UK citizen owes £8,000, not including mortgages.1 Substantial debt makes it difficult to escape the paycheque-to-paycheque cycle, put away money for savings or to set aside funds for the fun things in life.

Paying down debt is tough, but it’s certainly not impossible! There are several strategies available that can help you prioritise your payments for the most efficient payoff. Start with our step-by-step approach, then choose the method that best fits your lifestyle, debt balance and income.

Step 1: Understand What You’re Dealing With

Gather all the information from each account into a Google Sheet, Excel spreadsheet or budgeting software program so you can see all of them in one place. Make sure you record the balance, the interest rate and the minimum payment.


Step 2: Take a Look at Your Budget

In order to know where you’re heading, you need to know where you’ve been. Create another tab in your spreadsheet and comb through your monthly budget. In order to know how much you can allocate toward your debt payment, you have to analyse your current spending trends. Could you be contributing more towards paying down your debt? Are you spending money in places that you shouldn’t? Take the time to work out a budget that you can stick to so you have a realistic budget for your debt payoff. The easiest way to set yourself up for failure is by over allocating your finances and adding on more debt rather than chipping away at it.


Step 3: Investigate Lower Interest Options

When you initially apply for a credit card, you are offered an APR based on several factors, including your credit score, your current debt vs. your available credit, etc. If you have held the account in good standing for years, your credit score has improved or other financial factors have changed, it is possible that you qualify for a lower APR. Call your credit card company and ask — it could make a huge difference in your interest fees over time. Be aware that some companies will do a hard inquiry rather than a soft inquiry on your credit, so clarify first.


If you have a card with a very high APR and qualify for one with a much lower APR or a 0% APR introductory rate, you may want to consider a balance transfer. The additional cost that comes from interest can slow down your debt payoff process, so if you have access to a zero-interest promotional period (many of which last from six months to a year), it may be the best way to kick off your payments. Bear in mind, however, that you only want to explore this option if you are able to pay off the entirety of the balance before the promotional period ends — many cards that offer zero interest for the first year have a very high APR once that period is over.


Step 4: Commit to a Repayment Method

Now that you have the big picture of your finances and know what interest rates you are dealing with, there are several strategies for paying off your debt.

  • Snowball method: Pay off your debts in order from the smallest balance to the largest balance, regardless of the APR associated with that account.

Pros: You feel the success of your payoffs much faster, rewarding you with emotional satisfaction and keeping you motivated.

Cons: Depending on your balances and interest rate, this method could cost you more in the long run.

  • Avalanche method: Pay off your debts from the largest interest rate to smallest interest rate. Make minimum payments on the smaller interest accounts and put the remaining budget for your debt payoff entirely toward the highest interest rate balance.

Pros: It is usually the most cost effective way to pay down debt, potentially saving you much more than either of the other methods described.

Cons: If you have a very high balance on a card with low APR, it could actually cost more in interest than a low to medium balance on a card with high APR. Also, tackling the largest balance first could be discouraging over time.

  • Mirror method: Dispersing your payments equally on all accounts, regardless of their balance or APR.

Pros: Very easy to regulate and maintain since it is very consistent.

Cons: Does not take accruing interest into account.



1Brignall, M. (30 October 2017). Average UK debt at £8,000 per person (not including the mortgage). Retrieved 14 February 2018, from



The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.


Babs is a content writer at Enova International, Inc. with a Bachelors in Cinema Studies and English from the University of Illinois (ILL-INI!). She loves binge watching musicals, reading in the (sporadic) Chicago sunshine and discovering great new places to eat. Accio, tacos! Find out more about her on Google+.


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