Cheap ways to pay off your debts

Coins on a noteIf you're looking to pay off your debts for less, there are plenty of ways to go about it, from using your savings to taking out a balance transfer credit card with an interest-free period.

Use your savings
If you have any savings then you should use them to pay off all or part of your debts. The cost of the interest on your debts is likely to be far higher than you're earning on your savings.
Borrow from family and friends
Around 19 million of us have borrowed money from family and friends over the past year, according to research by thinkmoney. This can be a really good thing, particularly if whoever you're borrowing from is happy to lend it to you interest free.

But be sure both parties clearly understand how much is being borrowed and when it is due to be repaid. Put it down in writing if you want to be extra sure.

Use a 0% balance transfer credit card
For people with credit card debts of £2,000 or less, a 0% balance transfer credit card can be a good option, offering an interest-free period to get you back on track.

This is a really competitive market at the moment as the big banks slug it out with the likes of Tesco and Virgin Money, which is good news.

Barclaycard has just extended its top 0% deal again to a record-breaking 28 months.

Here's how the credit cards with the longest 0% balance transfer period compare.
Credit card0% balance transfer periodBalance transfer feeBalance transfer fee on £2,000 transferRepresentative APR after 0% period ends
Barclaycard 28-Month Platinum Visa28 months3.5%£7018.9%
Barclaycard 27-Month Platinum Visa27 months2.99%£58.8018.9%
NatWest Platinum MasterCard27 months3.10%£6218.9%
RBS Platinum MasterCard27 months3.10%£6218.9%
Tesco Clubcard Credit Card for Balance Transfers MasterCard27 months3.15%£6316.9%
Nationwide Select*26 months2.4%£4815.9%
Nationwide Credit Card26 months2.4%£4817.9%
Fluid 26-Month Balance Transfer Visa26 months2.89%£57.8018.9%
Virgin Money MasterCard26 months2.99%£59.8017.9%
Halifax 25-Month Balance Transfer Card25 months2%£4018.9%

*Open to new and existing current account customers only

As you can see, most of the cards have balance transfer fees around the 3% mark. The exceptions are the Nationwide Select and the Nationwide Credit Card with fees of 2.4% Halifax 25-Month card with an even-lower fee of 2%.

If you think you could pay off your debts in a year, Tesco's Clubcard with Low Balance Transfer Fee has a fee of just 0.9%. If you think 12 month isn't long enough but you could do it in 15 months, then Halifax's All In One card and Lloyds TBS's Platinum 15-Month card both charge 1%.

Just be wary of applying for a card with a shorter interest-free period and then not being able to pay off your debts in full by the end of that period.

And always, always make sure you make the minimum payment on your card or you could lose your 0% period.

Compare 0% balance transfer credit cards

Consolidate your debts into a personal loan
If you have larger debts and if they're scattered around credit cards, store cards or shopping credit accounts, you could pay them off in one fell swoop with a personal loan.

Loan rates have fallen in recent months and are now far, far cheaper than credit cards, even for smaller amounts. The interest rate you'll be charged will depend on your credit status. Here are some examples that include a representative APR. This is the annual calculation of interest and fees, but it only has to be offered to 51% of applicants.

If you can pay off your loan in a shorter amount of time, that will also cut the interest rate further.

Here are some representative examples for different loan amounts:
Loan amountRepayment periodProvider with lowest representative APR (and total amount repayable)Provider with second lowest representative APR (and total amount repayable)Provider with third lowest representative APR (and total amount repayable)
£2,000Three yearsZopa – 10.3% (£2,318.04)RateSetter – 10.7% (£2,330.28)Sainsbury's Bank – 18.6% (£2,573.64)
£2,000Five yearsZopa – 9.6% (£2,502.60)RateSetter – 10.3% (£2,540.40)Sainsbury's Bank – 18.7% (£2,999.40)
£4,000Three yearsZopa – 6.8% (£4,419.72)RateSetter – 7.2% (£4,444.56)Hitachi Personal Finance – 8.0% (£4,493.88)
£4,000Five yearsZopa – 8.0% (£4,834.20)Hitachi Personal Finance – 8.0% (£4,834.20)RateSetter – 8.3% (£4,866.60)
£5,000Three yearsZopa – 6.3% (£5,486.04)Hitachi Personal Finance – 6.5% (£5,501.52)Clydesdale Bank / RateSetter / Sainsbury's Bank - 6.8% (£5,524.92)
£5,000Five yearsZopa – 6.4% (£5,830.80)Hitachi Personal Finance – 6.5% (£5,844.00)Clydesdale Bank – 6.8% (£5,883.60)
£7,500Three yearsZopa – 4.8% (£8,055.36)Sainsbury's Bank – 4.9% (£8,067.24)Derbyshire Building Society – 5.0% (£8,078.76)
£7,500Five yearsZopa – 4.9% (£8,449.80)Derbyshire Building Society – 5.0% (£8,469)M&S Bank* – 5.0% (£8,469)

*Existing customers only

The names of Zopa and RateSetter might be unfamiliar. They are so-called peer-to-peer lenders, where people can lend to people who want to borrow. They essentially cut out the middleman - the banks and building societies - which is why they can offer cheaper rates. Note that to obtain the Sainsbury's Bank rates, you need to have a Nectar card and to have used it in the last six months.

When you're looking at personal loans, it's important to consider your monthly repayment, as well as the total amount repayment, and look out for any other fees. Don't overstretch yourself by borrowing too much, meaning you're going to struggle to make your monthly repayments.

It's also important to not go on another spending spree, just because you've cleared your credit card/store card/store credit account, as you'll end up with another pile of debt.

Compare personal loans

This article has been updated since its original publication

The richest self-made Brits
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Cheap ways to pay off your debts

The Monaco-based billionaire is said to be worth more than £4.2bn, with Topshop and Topman among the country's most successful brands. His first job, aged 12, was working for a shoe importer. He set up his first business at 15 with a £20,000 loan, on-selling imported jeans from the Far East to London-based retailers.

Branson's first successful business venture came in 1976 when he set up Student magazine aged just 16. In 1970, he founded a mail-order record retailer and within a year had opened his first shop on London's Oxford Street – Virgin Records. His fortune is estimated at £3.085 billion, according to the Sunday Times rich list.

The inventor gave his name to the household vacuum cleaner that would make him a fortune of £1.45 billion. James Dyson first reinvented the vacuum cleaner with the launch of his dual cyclone bagless 'G-Force' cleaner in 1983, followed more recently by the hand dryer and the fan. In 1997, Dyson was awarded the Prince Phillip Designers Prize, and elected a Fellow of The Royal Academy of Engineering in 2005.

Founder of Specsavers, Bristol-born Dame Mary Perkins is Britain's first female self-made billionaire, reportedly worth £1.15 billion. The 67-year-old and her husband Douglas, 68, founded the eye-care company in 1984 and they can now boast more than 900 stores across Britain. Perkins was made a Dame Commander of the Order of the British Empire in 2007 as recognition for her work.

Recently retired Beckham is the highest earner in British sport, according to the Sunday Times Sport Rich List. 'Brand Beckham' that has seen the 38-year-old amass a fortune of £165 million from endorsement deals and salary payments from his company, Footwork Productions, over the last decade. But Beckham is still some way off the richest sportsman in the world - golfer Tiger Woods, who is worth a staggering £570m.

Yorkshire Tory peer Lord Kirkham entered the billionaire league in 2010 when he sold his furniture company, DFS, for a reported £500m. In 41 years, Kirkham grew the brand, which started on the outskirts of Doncaster, to 79 stores, three factories and more than 2,600 staff. He received a Knighthood in 1995, a Peerage in 1999 and a CVO in 2005. He now owns a large share in Iceland supermarkets and is worth a reported £1.1billion.

The former Beatle takes the top spot in the Sunday Times Rich List of musical millionaires, sharing a £680 million fortune with his wife Nancy Shevell. McCartney has topped the list of wealthy musicians every year since it was formed 1989 when his fortune was estimated at £80 million.

The chairman of Carphone Warehouse and Talk Talk, Essex-born Dunstone, 46, started his retail empire selling mobile phones from his west London flat in 1989. His fortune rose by £396 million to £1 billion in a year, after the demerger of Carphone Warehouse and Talk Talk. Carphone Warehouse is Europe's largest independent mobile phone retailer and Dunstone was awarded a Knighthood in 2012 for services to the mobile communications industry.

Author of the hugely successful Harry Potter series, Joanne Kathleen Rowling, has a net worth of £560 million – making her the world's richest author. Rowling wrote the first Potter books on a manual typewriter while a single mother living on benefits. The manuscript for the first Harry Potter novel was rejected by 12 publishers and when finally accepted, Rowling received an advance of just £1,500. Harry Potter is the highest-grossing film series of all-time and the brand has been estimated to be worth as much as £10 billion.

East-ender Lord Sugar, best known for his no-nonsense judging on BBC1s The Apprentice, started his career at 16, selling car aerials and electrical goods out of a van he had bought with savings of £50. In 1968 at the age of 21, Sugar started home electronics company, Amstrad (short for Alan Michael Sugar Trading). By the age of 40 he was worth about £600m. Sir Alan sold Amstrad in 2007, and is now worth a reported £770m, with much of his wealth coming from his extensive property empire.


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