Cheap ways to pay off your debts

Updated: 
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

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