From micro payments to avalanche method

START the New Year with a fresh slate and tackle the financial issues you have been dreading.

Clearing debt will leave you feeling mentally lighter and it needn’t be an uphill battle. There are lots of different methods to choose from which can make getting out of the red feel like a doddle.

Once you have repaid money owed, you can put more cash towards the fun things in life such as holidays and nights out.

And it also gives you more cash to put into savings, if you’ve been dreaming of buying a house, for example.

Repaying debt is all part of sorting out your finances and is one of the first places to start when making a plan for your financial future.

Karen Barrett, founder of financial advice platform Unbiased says: “When deciding how to clear your debt, it needs to be considered as part of a long-term financial plan that reflects your goals and circumstances.

“Crucially, any repayment strategy should ensure essential costs are covered and that you have an emergency fund, as well as a plan for longer-term goals such as retirement.

We’ve spoken to experts including Rachel Springall from Moneyfacts to give the advice you need to hear and help your get out of the red for good in 2026…

Avalanche

An avalanche sounds dramatic but it’s about throwing all your resources at the debt with the highest interest rate.

The more you save on interest each month, the more money you have to repay underlying debts, so this is a sensible method for repaying cash.

First make a list of your debts and outgoings and make sure the priorities are sorted – this includes rent or mortgage, as well as council tax and energy bills.

Then you make the minimum repayment on your debts. Any extra cash you have is siphoned to the debt with the highest interest rate

Once the highest rate debt is cleared, you then move on to the next highest interest rate until all are cleared.  

Snowballing

It’s easy to feel overwhelmed if you owe money across a few places such as different personal loans and credit cards.

But this is where another winter weather themed method could could be the answer.

When you can’t clear all debts at once, it can be tricky to decide which to prioritise.

Using the ‘snowballing’ debt method, you put any spare cash towards priority bills and debts first.

This include rent or mortgage, as well as council tax and heating bills, so you don’t lose your home.

Once those are paid and any arrears cleared, you should then assess your debts making a list from smallest to largest.

The idea is that you focus on paying off the smallest unsecured debt – throwing any spare cash at it – while keep to the minimum repayments on any others.

However, it’s important to note this method can leave you paying more interest overall.

But many people find that it helps keep you motivated to see clear progress.

Rachel Springall, money expert from finance site Moneyfacts, says: “It might seem stressful to try and prioritise paying back multiple debts, and the psychological benefit may be to pay back small debts first through snowballing.”

Micro payments

Micro debt payments is a trend sweep through social media platform – and for good reason.

Making big lump sum payments towards your debt can feel daunting and even unmanageable.

On the other hand, paying off just a couple of pounds more frequently can feel much less scary and it all adds up.

This method works best with a credit card or other debt you can easily log on and repay daily.

Transferring a couple of pounds out of your account, means you are less likely to miss the cash and the repayments will start to add up on your debt.

Checking in daily can help you feel motivated to keep up repayments too.

Rachel says: “You can gradually pay off debts using small amounts of savings to gradually reduce the balance, there are ways to automate the savings habit with apps like Plum so it’s less of a headache to do it every week.

“Every time a deposit is saved, users will get a notification, they can then use that little bit of surplus cash to clear more debt.

“Little and often can be a great method to slowly pay back debts without feeling too overwhelmed.”

Slash costs

When looking at debts, it’s crucial to check if you can pay less interest on what you owe.

If you can hack down your interest costs, it leaves you more money to pay off the underlying debt.

Often this means moving credit card debt to a zero interest balance transfer card.

You’ll usually have to pay a fee to move the debt, which is usually a percentage of between 1-3% of the amount you want to move.

Take this into consideration when deciding whether it’s worth shifting debt and look for the lowest fee available to you.

You can use a comparison site to check which balance transfer cards are available to you, such as MoneySuperMarket.

Many have a tool that will let you do a soft check so you can see which you are likely to qualify for without haring your credit history.

Rachel explains: “Debts on credit cards can be paid back much faster if the minimum repayment is switched to a fixed payment every month, and this can be altered, just be careful not to change the payment to the full balance by mistake.

“Making heavy fixed repayments can clear debt faster but it’s also important to have a bit of cash stashed on the side in case of emergencies.

“It may be a wiser decision to move any interest-bearing debts to a 0% offer if the balance is going to take a few months to pay off.

“Thankfully, the length of interest-free balance transfer offers has improved over the 12 months, which give borrowers more breathing space.”

Five become one

Another option is consolidate your debt into one.

This can mean you are only make one repayment each month and feel much easier to stay on top of.

Some debt services you find on the internet offer to consolidate debts for a fee, but if you feel your circumstances are right, you can do it yourself with a personal loan.

Interest rates on loans are typically smaller than a credit card so you will save and it just comes out of your bank account each month.

If you choose to use a personal loan to pay off your debt, just make sure you close your credit cards so you aren’t tempted to build debt back up on the plastic.

Rates on loans have also fallen, says Rachel Springall, money expert from finance site Moneyfacts.

She said: “The average rate on a £5,000 loan over three years is around 0.50% lower on average year-on-year, now 10.7% APR.”

Mix it up

You could of course do a mixture of all the different methods. 

Before planning how to pay off debts, you should make a budget and work out realistically how much money you can put towards repayments each month and and even every day.

Charity StepChange has some useful budget templates on its website to help you get started.

You could try setting a time frame for how long it should take to pay off your highest-interest debt.

Then log on daily to repay a small amount.

Then use the snowball method for the rest of your debts.  

For example, each time you have a bit of extra cash you could log on and make a small payment.

Simon Trevethick, head of communications at StepChange, said: “People often turn to moving debt onto 0% deals, snowballing, or a range of other methods.

“For some, this may be enough, and you may be able to manage this yourself and pay off the debt over time.

“The reality is though that what may work for one person on one budget, may not work for someone else.

“If you feel like you are struggling to cope and need help, a debt advice charity like StepChange can give you tailored advice specific to your situation and help you on the road back to financial health.”

How to get some breathing space

If you feel like you’re drowning in bills, call the companies you owe and explain your financial situation.

Often they will offer you more manageable ways to repay. 

The Debt Respite Scheme, also known as Breathing Space, gives you legal protections from creditors for a set period of time.

A creditor is anyone you owe money to, including banks, credit card companies and mortgage lenders.

The protection includes a pause on enforcement action, like bailiffs, contact from creditors and freezing interest and charges on debts.

There are two types of Breathing Space – standard Breathing Space and mental health crisis Breathing Space.

Most people opt for the standard Breathing Space option.

This allows you time to get debt advice and set up a debt solution without having to worry about being chased by creditors.

If you pass eligibility checks, your creditors won’t be able to add interest or fees to your debts, or take enforcement action, including sending bailiffs to your home, for up to 60 days.

If you can afford to be making regular debt repayments, the Breathing Space won’t stop this from happening.

The mental health crisis Breathing Space is for those receiving mental health crisis treatment.

You can apply for either Breathing Space option through a debt adviser.

The moneyhelper.org.uk website, run by the government, has its own debt adviser finder tool, which is free to use.

Free help is available..

If you need more help on managing debt, you don’t need to pay for it.

There is plenty of free, independent advice is available from charity-run services such as National Debtline, Citizens Advice and StepChange.

The earlier you seek free advice, the quicker and easier your problem will be to solve.

You can also find information about Debt Management Plans (DMP) and Individual Voluntary Arrangements (IVA) by visiting MoneyHelper.org.uk or Gov.UK.

Speak to one of these organisations – don’t be tempted to use a claims management firm.

They say they can write off lots of your debt in return for a large upfront fee.

But there are other options where you don’t need to pay.