How To Avoid Getting Into Debt


Most of us carry some level of debt and are fully in control of our repayments. When your debt level gets out of hand, however, it comes with serious consequences, ranging from hurting your credit rating, all the way up to potential legal action.

In this guide, we’ll explore debt and ways to avoid it, including how debt impacts your credit rating, our top tips for avoiding debt, and positive steps you can take if you’ve fallen into debt already.

What is the problem with having too much debt?

Some debts are manageable, but debt becomes a problem when you can’t save money, start missing payments, or need to borrow more to stay afloat.

What is debt?

Put simply, debt is any money you’ve borrowed that you will eventually have to repay. Most of us carry some level of debt, whether it’s the mortgage on our home, or a credit card we pay off monthly.

If you take out a credit card, for example, credit card companies offer you a credit limit. You can use your credit card to purchase items up to the amount of your monthly credit limit, and however much you spend, you will owe as a debt to the credit card company.

If you can afford to make your credit card debt repayments, this kind of arrangement isn’t a problem. But if you become over reliant on your credit card, or realise you can’t afford to make your repayments, then you could find yourself falling into problem debt.

How to avoid getting into debt

For a lot of us, we wouldn’t be able to live the life we want without taking on some form of debt. You can’t just avoid credit, or stop spending money, so how do you avoid getting into debt?

Below are our top tips to avoid debt and stay on a sound financial footing.

Know what you’re signing up for

The first and best way to avoid debt is to know what you’re signing up for. Whether you’re taking out a car loan, a student loan, or even just opening a new bank account, it’s important to read the fine print before you put your name to any arrangement.

That might sound obvious, but you’d be surprised how many people sign up to financial products without fully understanding their implications.

Any credit agreement will come with interest, late fees, and potential consequences for your credit rating – make sure you know exactly how you will be impacted should you fall behind with your repayments.

Don’t let credit card debt build up

One of the most common debts in the UK is credit card debt. Making use of a credit limit can actually be a positive thing, but losing control of your credit card balance is serious.

You don’t need to steer clear credit altogether, but stay on top of your credit card bills. It can be healthy to view your credit card as a last resort, only to be used for major purchases, like holidays, when you don’t have the money upfront. Anything else should go on your debit card.

Create a personal budget

Creating a budget for yourself is personal finance 101. If you know exactly how much disposable income you have, after paying bills and other essential monthly outgoings, then you’ll know how much you have to spend before falling into deficit.

To create a budget, start with your after tax income and take away essential costs like rent, bills, and money for food. What’s left is your disposable income, which you’re free to spend as you choose.

Make sure you monitor your disposable income throughout the month. If your bank balances start to dwindle as the month goes on, try to adjust your spending until you next get paid, rather than relying on credit and other forms of borrowing.

Save money for a rainy day

The type of people who regularly save money for the long-term also tend to be the type of people who avoid falling into serious debt.

It’s healthy to take a long-term view of your finances. Setting savings goals for yourself and regularly putting money away helps you think about the big picture, stay on track, and avoid impulse purchases that could jeopardise your savings targets.

Make sure you have an emergency fund

Arguably more important than saving money for a rainy day is saving an emergency fund which can help you deal with unexpected expenses.

Financial emergencies happen. If your boiler breaks down or your car needs repaired and you don’t have money put away, you can quickly find yourself falling into debt you hadn’t been prepared for.

You should aim to have emergency savings equal to at least two or three months’ wages. That means if the unexpected happens, or you lose your job, you have a financial safety net and won’t have to immediately turn to credit.


The first and best way to avoid debt is to know what you’re signing up for.

What should I do if I'm already in debt?

While they say prevention is better than the cure, it’s not always possible for you to avoid debt altogether.

If you’ve already fallen into debt and are struggling with repayments, below are some positive steps you can take to improve your situation.

Try to avoid only making minimum payments

When you fall into credit card debt, you may think the best tactic for repayment is to simply make the minimum payment – after all, this places less of a strain on your monthly budget and allows you to live more comfortably.

The problem is that this extends your debt. It takes over 20 years to clear a debt using minimum credit card payments, because high interest rates mean the bill grows every month. Instead, treat clearing debt as a priority, and make the highest repayment you can afford.

Deal with your priority debts first

Debts can be organised into a certain hierarchy based on the consequences if you don’t repay. If you’re in debt, make sure your disposable income – after essential bills – goes towards the highest-priority debts first.

Tier 1 priority debts include rent and mortgage arrears, as well as council tax and utility bills. Next, deal with non-priority debts like credit card debts or a personal loan.

Only once you have dealt with these debts should you consider rebuilding your savings with any extra money you have left over.

Seek professional debt advice

If you owe more money than you’re making and creditors are hounding you for payments you can’t afford, you need to take action.

Unpaid debt can ruin your credit rating and you may even face legal action from creditors if the situation gets bad enough. Seek advice from a legal professional or a professional debt adviser; they will look at your situation and put you on the right path.

Consider a debt solution

If you have no realistic way of repaying your total debts, but you do have enough disposable income to make a monthly contribution towards what you owe, you may qualify for a Government-backed formal debt solution.

Debt solutions like an Individual Voluntary Arrangement (IVA) can be a life saver. They let you repay a portion of what you owe through a series of monthly payments. Once your payment term finishes, creditors write off the debts you can’t afford.

Find out more about IVAs here.

How we helped Paige

It was literally the best decision of my life, and it has actually changed my life, cheesy as that sounds, it has changed my life.

Paige , IVA Customer

How does debt impact your credit rating?

Your credit rating is a score that demonstrates to lenders how likely you are to be able to repay any money you borrow. The higher your credit score is, the more likely lenders are to let you borrow from them.

That’s why prudent debt management is key to protecting your credit profile –  because problem debt can have a seriously negative impact on your credit score.

If you fall behind on debt repayments, this will be listed on your credit history and lower your credit rating. With a low credit score, lenders will view you as a risk, meaning you may find it challenging to open new credit accounts.

Where can I get debt advice if I'm struggling financially?

Not many people avoid getting into debt altogether, whether they’ve taken on a mortgage, or make use of credit cards. But for some, debts and other money worries can feel like they’re taking over your entire life.

Your Debt Expert can help. We’re a team of debt specialists who have years of experience helping people deal with their debts using formal debt solutions like IVAs.

To find out whether a debt solution is right for you, and get the best advice for your situation, talk to one of our advisers today on 0800 082 8086.

Where can I get more advice on How To Avoid Getting Into Debt and other debt solutions?

To discuss your options and get the support you need to deal with your debt today, contact us now on 0800 082 8086 or click the button below to get started.