Pay off debt in 2023: Five steps to clear it including credit cards, mortgage and energy bills


This year has seen the cost of living crisis spiral out of control, leading to rising debt as households grapple with higher outgoings. 

Britons are paying more for almost everything, from mortgages and rent to food and energy bills. 

Energy costs are now a bigger drain on bank balances, with the average household using £3,549 of power per year – though these bills are capped at £2,500 a year for typical use under the Government’s energy price guarantee, rising to £3,000 from April 2023 until April 2024.

Soaring bills mean the average UK adult’s debt – not counting mortgages – rose from £25,879 in 2021 to £34,566 in 2022, according to money.co.uk.

Budget better: It may sound simple, but sitting down and working out all your costs is the first step on the road to getting out of debt

Almost two million households missed a major bill payment in the last month due to the rising cost of living, the consumer charity Which? has said.

If you are in debt, or worried for someone who is, This Is Money has rounded up five pieces of advice from debt experts on how to pay off what you owe in 2023.

1. Make a monthly budget

Experts agree that the first step in dealing with debt is to take stock of the money you have coming in and out each month.

Andrew Hagger, of personal finance experts MoneyComms, said: ‘Without knowing exactly where you are financially, it is difficult to make plans. 

What to do if you are struggling with energy bills 

Just one in five (18 per cent) of us are putting the central heating on as much as we need to, according to research by survey firm YouGov earlier this month. Even worse, 15 per cent of people cannot afford to heat their properties at all.

If you can’t afford your energy bills, regulator Ofgem has three steps to follow.

1) Speak to your energy firm – it may set up a payment plan, give you a hardship grant or give you more time to pay

2) See what help is out there – in addition to energy firms’ schemes and grants, the Government has several cost of living payments you might qualify for. Citizens Advice has a full list 

3) Get proper advice – speak to an organisation such as the Money Advice Service, National Debtline or StepChange  

‘People often don’t know exactly what they owe, and when they take a guess they often aren’t anywhere near.’ 

When in debt it is crucial to identify exactly how much you owe to which companies, what the repayment deadlines are, and how much interest you are being charged. 

It is also important to work out your other regular costs, and how much money you have coming in to deal with all this.

Sue Anderson, head of media at debt charity StepChange, said: ‘While it may sound simple, creating a budget can really help you to understand and take control of your finances.

‘Make a note of all the money you have coming in, including wages, benefits, pensions and housekeeping money from your partner or relatives. Next look at how much you’re spending by writing down everything you buy over a month – think about bills, the food shop, clothing, car or travel costs, subscriptions and so on.

‘Once your budget is complete, subtract your estimated outgoings from your income. This is your disposable income, and it’s what you’ll have available to clear your debt.’

This is Money’s household budget calculator lets you input your salary and regular expenses to work out your monthly income and outgoings. 

2. Can you bring in any extra cash?

If your normal disposable income won’t cover your debts, you might be able to increase it in the short term.

If you are in work, the obvious way to do this is to look for a better-paid job, seek a promotion or work more hours – though this is not possible for everyone. 

There are plenty of other ways to make a few extra pounds, however. We rounded up 20 of them here, from renting out your driveway to switching your current account. 

You could also try using cashback websites such as TopCashback or selling unwanted clothes and household items, StepChange said. 

If you’ve recently seen a reduction in your income, for example because you’re working on reduced hours or have been made redundant, you may also be able to claim Government support.

The Government has a benefits calculator that works out if you are owed any extra financial help.

3. Can you make any savings?

There are many ways to save money, and anything you save can be put towards those debt repayments.

It could be as simple as doing your food shop at a cheaper supermarket, checking if you’re eligible for a social tariff on your broadband or cancelling unnecessary subscriptions.

Hagger said: ‘Check if you are still paying any unwanted subscriptions, direct debits and so on.’ 

With some planning and expert help you can get on the road to being debt free next year even during a cost of living crisis

With some planning and expert help you can get on the road to being debt free next year even during a cost of living crisis

4. Prioritise repayments

Once you have done all this, you may be able to pay off all your debt within a few months. But if you cannot, StepChange said there are further steps to take.

Sue Anderson said: ‘If you can’t clear your debts quickly, don’t panic. However, it is important to know how to prioritise.’

What to do if you are in mortgage arrears 

The first thing to do is speak to your mortgage lender. 

They might be able to offer you a break from paying your mortgage, to give you breathing space.

If you are on a repayment mortgage, some lenders may let you swap to an interest-only deal, which means paying less per month as you are not paying off the loan, just the interest.

Mortgage lenders may also let you extend the term of your mortgage. This means your monthly payments drop, but you will repay more in the long term.

Certain types of debts should be more of a priority, as the consequence of not paying them is more serious than others. These can include your rent, mortgage, energy bills and council tax, among others.

Once you have paid off these costs, try to pay off the minimum on every debt you have. This will stop what you owe getting any larger as interest racks up.

As soon as you have managed that, focus on paying off the debt with the highest interest and charges first. If you have several different debts, consolidating them into one can help get a grip on them.

The most popular way to do this is with a 0 per cent interest credit card. These cards charge no interest at all for a limited period.

These can help with getting out of debt, as any balances moved onto a 0 per cent card do not build up interest for a certain period.

This lets you pay off debts without interest racking up, helping you get out of debt quicker. Then you have to be sure you can pay off the debt before the 0 per cent period ends, or you will start paying interest again.

>> How to reduce credit card interest with 0 per cent deals and balance transfer

Consolidating: 0% credit cards are one of the most popular ways to get all your debts in one place and give yourself some space to start paying

Consolidating: 0% credit cards are one of the most popular ways to get all your debts in one place and give yourself some space to start paying

Try not to use the card for spending or taking cash out, and make sure you make the minimum repayments, as otherwise you can lose the 0 per cent interest benefit.     

There are a few hurdles to getting a 0 per cent card. Hagger said: ‘Trying to refinance can be tricky. You can still get 0 per cent balance transfer credit cards but you may need to have good credit first.’

First off, you have to get accepted. The exact terms of these cards will vary slightly depending on your financial circumstances, such as your salary, credit score and how much you spend on bills.

Banks such as NatWest are offering cards with 0 per cent interest for 33 months, with this rate jumping to 22.9 per cent after that point.

Top ten 0% interest credit card deals
PROVIDER  CARD NAME  0% TERM  APR   
NatWest  Longer Balance Transfer Credit Card Mastercard 33 months  22.9%   
Royal Bank of Scotland  Longer Balance Transfer Credit Card Mastercard  33 months  22.9%   
Ulster Bank  Longer Balance Transfer Credit Card Mastercard  33 months  22.9%   
Sainsbury’s Bank  30 Month Balance Transfer Credit Card 30 months  21.9%   
Barclaycard  Platinum 30 Month Balance Transfer Visa  30 months  22.9%   
Halifax  Longest 0% Balance Transfer Credit Card Mastercard  29 months  22.9%   
Santander  Everyday Long Term Balance Transfer Credit Card Mastercard  28 months  22.9%   
Virgin Money  28 Month Balance Transfer Credit Card Mastercard  28 months  22.9%   
M&S Bank  Credit Card Transfer Plus Offer Mastercard  28 months  23.9%   
Barclaycard  Platinum 27 Month Balance Transfer Visa  27 months  22.9%   
Source: Moneyfacts, correct as of 23 December 2022

But even if a credit card is advertised at 0 per cent interest, there may be a fee to pay when you move money onto it. These are called ‘balance transfer fees’, and most are in the region of 2 to 4 per cent.

Some banks offer credit cards with no balance transfer fees, such as Barclaycard and HSBC. But again, bear in mind providers offer different deals to different people.

5. Don’t wait to get help

Even if you have tried all the above and it has not worked, you can still get help to get out of debt.

Anderson said: ‘If you’re worried about your finances or experiencing problem debt, you don’t need to suffer in silence. Don’t delay in getting in contact with a debt advice organisation for free and impartial advice.’

These organisations may be able to help:  

  • Money Advice Service (soon to be called Money Helper) – 0800 138 7777 or online  
  • National Debtline – 0808 808 4000 or online 
  • StepChange – 0800 138 1111 or online 
  • Citizens Advice – 0808 223 1133 or online 

THIS IS MONEY’S FIVE OF THE BEST CREDIT CARDS

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