Paying off debt is hard enough without the added pressure of a low income. But it is not impossible. If you are struggling to pay your debts or falling behind on gas and electricity bills, there are ways to take control – without needing extra cash or a new loan. This guide walks you through how to pay off debt on a low income, one step at a time.
The main focus must always be your priority debts. These include rent, council tax, electricity bills, maintenance payments and anything else essential for your daily needs. So before worrying about credit card debt or other non-priority debts, make sure you can pay your basic living costs and any priority bills first.
If you are struggling to pay your council tax, speak to your local council. They may offer a reduced payment plan. The same goes for your energy supplier if you are behind on gas or electricity bills. They may be able to freeze interest or offer extra help if you are having financial difficulties.
Once the essentials are covered, it is time to fully understand the rest of your finances. Look at your monthly income and spending habits. How much spare income is left after the essential costs have been paid? Can you make regular payments towards your other debts, even if the payments are small, to begin with? If not, it might be time to speak to a debt charity, not just your lender. StepChange, National Debtline and Citizens Advice can help you create a repayment plan, known as a debt management plan (DMP), where you pay your debts through one monthly payment.
A debt relief order (DRO) might be the right option for some people. It is for those with few assets, low income and less than £50,000 in total debt. A DRO freezes interest and payments for a year, and after that most debts are written off if your situation doesn't improve. You need to speak to an approved insolvency practitioner to apply for a DRO.
If you are juggling a number of debts like overdrafts or credit cards, check your credit report (try getting your Experian credit report for free). This helps you understand what is impacting your credit file and whether you might be eligible for lower-interest options.
Making only minimum payments means clearing debt takes longer and costs more, especially with high interest rates. To save money, you can pay debts more efficiently through debt consolidation or a balance transfer card. Make sure you only borrow what you need and don't take on new debt beyond what is required to repay your high-cost borrowing.
Some lenders allow reduced payments or will agree to freeze interest temporarily, especially if you are experiencing health issues or other serious challenges. Always let your lender know if you are struggling to pay. Just speaking to your lender will not impact your credit file and they may offer you a better repayment option.
Don't wait for debt collectors or a court judgment if you can't afford to pay your debt or keep up with monthly payments. Talk to a free debt advice service as early as possible. A debt management plan, individual voluntary arrangement (IVA) or a debt relief order could offer long-term debt relief without risking your home or facing court judgements.
Paying off debt on a low income is not easy, but it is possible with the right support and a clear strategy. Focus on priority debts, try to reduce the interest you pay and explore solutions that match your circumstances. You don't need to face this alone. Help is available from your lender and independent debt charities.
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