How to pay off your credit cards and loans faster

Published  16 June 2023
   5 min read

You’ll pay less interest if you pay off credit cards and loans faster, and you’ll have less debt to pay each month.  

Not everyone has the spare money to do this. That’s why this guide has tips to help you work out what’s possible and start clearing your debts. 

Start by reviewing your current situation 

Before you start paying off your credit cards and loans, it’s always worth looking your current finances.  

You can start by working out: 

  • How much your essential payments cost each month, such as council tax, utility bills, food, and your rent or mortgage 
  • Then work out how much the minimum payments or fixed instalments are for your credit card and loans
  • You should now be able to see how much is left each month, but you should set a portion of this aside to cover emergencies.  

The final point may not seem important, but it’s wise to have an emergency fund as life can be unpredictable. Our guide to starting an emergency fund can help you prepare for the worst, even if you don’t have much money to spare. 

Once you’ve worked all of this out, you can use any leftover money to pay more towards clearing your credit card or loan. Try to pay off your most expensive debts first. These are the ones that charge you the most interest – most commonly store credit cards. 

Ways to pay off credit card debt faster 

Now that you know how much more you could pay off each month, there are even more ways to pay off debts faster. 


Check if you can get a better deal 

Your first priority should be reducing the amount of interest you’re paying on your credit card debt. 

It’s worth asking you provider if you can move your credit card debt to a 0% balance transfer card, then using a comparison site to find one that’s right for you. This is easier if you have a good credit rating. If you don’t, our credit rating guide can help you move towards a better rating. 

You won’t be charged any interest on your balance if you transfer to a 0% balance transfer card. The interest free period usually lasts 18—36 months, but this depends on the provider. Keep in mind that you may still be charged interest on any new purchases you make. 

It’s important to pay off the debt within the interest-free period as the interest rate will jump back up at the end of it. 

You’ll also have to pay a transfer fee (typically 1-3% of the balance you transfer). For example, if you transfer £500 to a new card with a transfer fee of 3%, this will cost you £15. 

Although there’s an upfront fee, transferring to this type of credit card can give you a break from paying interest on your debt. As a bonus, you can even use the money you save on interest to pay off your credit card debt faster. 


Pay off as much as you can afford each month 

If you can afford it, you should pay back more than the minimum monthly amount set by your lender.  

Paying back the bare minimum means that your balance will reduce very slowly. It could take years to clear the debt this way, so paying even a little more can make a big difference. 

For example, let’s say you have £2,000 on a card that charges an interest rate of 25%, and you pay the minimum amount of £57 each month (the minimum amount will reduce each month as your balance falls)  

In this situation, it would take 25 years to clear the debt, and cost over £3,500 in interest.  
However, if you chose to pay a fixed amount of £60 a month instead – just £3 more than the original minimum payment – you could cut the amount of interest by as much as £2,367. You’d also be debt free nearly 21 years earlier.  


How to pay off a personal loan faster 

Personal loans don’t work the same as credit cards, but there are still some tips that can help you clear them faster. 


Increase your monthly repayments  

Personal loans are designed to be paid off over a fixed period. Your monthly repayment amount is set at the start to make sure this happens.  

However, it’s possible to overpay on personal loans. You just need to tell your lender before you do it. This way you’ll pay less interest overall and pay off your loan faster. 

Your lender can’t charge you for overpaying if you took out your personal loan after 1 February 2011. However, there may be charges if you overpay by more than £8,000 in a year.  

All loans are different, so it’s worth checking the small print and speaking with your lender for more information. 


Check what interest rate you’re paying 

You can check to see if it’s possible to switch to a cheaper loan that has a lower interest rate. This can be useful, as you can use the cheaper loan to pay off the more expensive loan in full.  

If you do this, and stick to the same repayment amount you were making before, you’ll pay off your loan faster and pay less interest overall. 
Check with your lender first to see if there are any penalties for paying off your current loan early.  

There shouldn’t be any penalties if:  

  • You took the loan out after 1 February 2011  
  • Are paying back less than £8,000 in a year. 
  • You can search for personal loan deals on price comparison sites. It’s important to always read the small print, and seek financial advice if you think you need it.  

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