How to reduce borrowing on credit

If you're worried about missing loan or credit card payments and falling into debt, there are many different ways to reduce your borrowing and the best one for you will depend on your personal circumstances.

You can find out more about your options for reducing your borrowing below.

If you're already missing payments, prioritise your debt or seek free, confidential debt advice.  

For help with rising living costs, check out support options.

If you’re paying more for your borrowing than you’re getting on your savings, it makes sense to pay off your loans, credit or store cards – as long as you can access funds in an emergency and you won’t be charged high penalties for repayments.

If you have several loans to clear, aim to clear the most expensive ones first. These are some common examples: 

• most credit cards

• store cards 

• unauthorised overdraft

• catalogue shopping 

• payday or short-term loans

• door-to-door lending (home credit). 

If you’ve been spending more than you should and are juggling two or more types of borrowing – such as credit cards, store cards, personal loans or overdrafts – it’s a good idea to get things back under control before you get into further debt.

The first step is making a note of the interest you’re paying on your credit, store cards or personal loans so you know which is the most expensive.

Then take control of your money by working out your living costs and making a budget – so you know what’s coming in, what’s going out, and when. This will give you a clear picture of where your money goes and shows you where you might have a chance to save money.

If you’re worried about missing payments, set up a regular Direct Debit or standing order to make sure you keep on track.

If you have store cards, credit cards or personal loans, the store cards will probably be the most expensive. So it’s important to check the cost of all your borrowing and make sure you pay off the most expensive debts first.

Find out more about prioritising debt or seeking free, confidential debt advice. 

Credit cards also charge varying rates of interest. You can find the rate on your credit card statement.

Of all your borrowing, pay the most on the one with the highest interest rate first. This will vary depending on what kind of balances you have on the card – purchases, balance transfers or cash withdrawals.

Make sure you pay at least the minimum payment on all your borrowing, otherwise you’ll face charges and damage your credit rating. 

Paying the minimum amount each month can make it feel like what you owe on your loan or credit card is affordable. But even if you’re on a 0% rate for an introductory period, paying just the minimum will make only a small impact on your debt.

It will also show up on your credit report. Other companies might assume you’re struggling and will be more reluctant to lend you money. This could even affect your chance of getting a mortgage in future.

If you don’t pay off your balance at the end of the month, and you’re not in a 0% introductory period, you’ll have to pay interest on your outstanding balance. The interest rate on credit and store cards can be a lot higher than for a personal loan.

Always try to repay as much as you can. Even if you only increase it by a small amount each month, it can make a huge difference.

If you have a good credit rating, you might be able to move your current credit card balance to another credit card offering a low or 0% deal.

There’s usually a fee to pay for this of between 2% and 4% of the balance transferred. Be aware that you need a good credit rating to qualify for the best deals. If you have a poor credit rating, find out how to improve it in our guide How to improve your credit score.

Credit card providers must contact people who have made very low or minimum payments on their credit cards for the past 18 months to suggest higher affordable repayments.

This is because people in this situation will have paid more in interest, fees and charges than what’s been paid back on the balance.

If you don’t respond, or ignore the issue, and the situation persists for more than 36 months, your account could be suspended. Your creditor could also take enforcement action against you.

Another option you might want to consider is called consolidation. This is where you combine all your borrowing into one pot (or loan).

Our guide on debt consolidation loans explains what you need to know.

If you have savings, it might be worth repaying some of your loans or credit cards – but only if you still have some savings set aside for emergencies and it doesn’t end up costing more in fees.

High interest charges on the most expensive forms of debt make it harder to put money aside, so clear these first. You’ll rarely be able to earn more on your savings than you’ll pay on your borrowings. So plan to pay off your debts before you start to save.

Make sure you understand what interest you’re paying on your different loans, so you know which ones you’re paying more for. 

It's best to save enough money to cover three to six months of living expenses for emergencies.

But if you have debts, use your savings to pay them off first. If you use a credit card for emergencies, don't use it for anything else to avoid accumulating more debt.

If you have extra cash, you might consider paying to reduce your mortgage. But it’s important to pay off other debts with higher interest rates, like credit cards or catalogue accounts, before you reduce your mortgage. 

If you have a fixed-rate mortgage, check for high early repayment charges before paying off your mortgage early.

For more information, see our guide Should I pay off my mortgage early?