Starting to Pay off Struggling Debts and Managing Them

Drowning in debt? You’re not alone. According to The Money Charity, the average total debt per UK household stood at over £65,000 as of early 2024 — a figure that continues to rise alongside the cost of living crisis [source]. Debt has become an everyday part of life, whether it’s student loans, mortgages, or mounting credit card balances.

But not all debts are created equal. While some—like mortgages or business loans—can be considered strategic investments, others, if left unchecked, can quickly spiral into financial hardship. Mismanaging debt not only affects your credit score but can also put your housing, utilities, and even mental health at risk.

Understanding the types of debt, the risks of ignoring repayment, and the smartest ways to manage or reduce what you owe is essential for building long-term financial stability. Whether you're dealing with priority debts or juggling multiple bills, it's never too late to take control.

This guide walks you through the essentials of debt prioritization, the dangers of neglect, and practical solutions to help you regain control and move toward a debt-free future.

TL;DR

• Know the difference between priority and non-priority debts.

• Pay priority debts first to avoid eviction, legal action, or service disconnection.

• Use strategies like snowball or avalanche to tackle non-priority debts.

• Act fast on debt emergencies like court summons or utility cut-offs.

• Create a realistic budget and track expenses to stay on top of repayments.

• Consider solutions like Think Money DMP or debt consolidation.

• Get help from professional debt advisors for tailored support and formal options (e.g., IVA, DRO).

Types of Debts

Before you can effectively tackle debt, it’s essential to understand the different types you may be dealing with. Each type of debt carries its own level of urgency, risk, and consequence. Broadly, debts can be categorized in three ways: by priority, security, and repayment structure.

1. Priority vs. Non-Priority Debts

One of the most important distinctions is between priority and non-priority debts—not based on how much you owe, but on the consequences of non-payment.

• Priority debts are those that can lead to serious legal, financial, or personal repercussions if left unpaid. These typically include:
  

  • Rent or mortgage arrears – risking eviction or repossession

  • Council tax debts – which can escalate to bailiff action or court summons

  • Gas and electricity bills – where unpaid accounts can lead to disconnection

  • TV licence fees, child maintenance, and court fines

In the UK, nearly 5.9 million households were behind on at least one household bill in 2023, according to Citizens Advice. Ignoring these debts doesn’t just impact your credit—it can directly affect your living conditions and legal standing.

• Non-priority debts, while still important, don’t carry the same immediate consequences. These include:

  • Credit card balances

  • Personal loans

  • Store card debts

  • Buy Now, Pay Later arrangements

  • Bank overdrafts

Left unmanaged, non-priority debts can still accumulate high interest, damage your credit score, and lead to debt collection actions—but they won’t result in eviction or legal penalties as quickly as priority debts.

2. Secured vs. Unsecured Debts

Next, it’s important to distinguish between secured and unsecured debts, based on whether or not there’s collateral involved.

• Secured debts are tied to an asset, like your home or car. Common examples include:

  • Mortgages

  • Car finance (like hire purchase or PCP)

If you fall behind on these payments, the lender has the legal right to repossess the asset. For example, failing to pay your mortgage can lead to foreclosure, a serious consequence that can affect your ability to obtain housing in the future.

• Unsecured debts, on the other hand, have no collateral backing them. They’re granted based on your credit history and ability to repay. These include:
  

  • Credit cards

  • Payday loans

  • Overdrafts

  • Personal loans

Because there’s no asset to reclaim, unsecured loans often carry higher interest rates to compensate for the increased risk to lenders.

In 2023, the UK’s total unsecured consumer credit lending stood at £234.4 billion, with credit cards accounting for a significant portion. For many households, unsecured debt is the most difficult to manage due to fluctuating interest and the temptation to borrow more.

3. Revolving vs. Installment Debts

A third lens through which to view debt is the structure of repayment:

• Revolving credit allows you to borrow up to a certain limit, repay it partially, and borrow again. The most common example is credit cards. These are flexible but often come with steep interest rates if you only make minimum payments. 

• Installment loans, by contrast, involve borrowing a fixed amount and repaying it in scheduled monthly installments over a set term. These include:
  

  • Personal loans

  • Student loans

  • Auto loans

Installment debts provide predictability and structure, which can be easier to manage—but missing payments can quickly lead to penalties or default listings.

Why Priority Debts Come First?

When you're juggling multiple debts with limited income, it's easy to feel overwhelmed—and tempting to respond to whichever creditor is the most persistent. But it's essential to recognize that not all debts are equal in urgency or consequence. 

Here's why priority debts should always come first:

They carry the most serious consequences.

Priority debts, if ignored, can lead to life-altering outcomes. Falling behind on your rent or mortgage could result in eviction or repossession, leaving you without a home. Similarly, missing payments on essential services like gas or electricity could mean disconnection, which directly affects your comfort, safety, and health. Unpaid council tax or court fines can even lead to legal action, including court summons or, in extreme cases, imprisonment. These consequences are far more severe than those associated with other types of debt.

Non-priority debts don't affect your basic needs immediately.

While non-priority debts like credit cards or personal loans can hurt your credit score and lead to collection action, they typically don’t pose an immediate threat to your living situation. Creditors may send letters or apply interest and penalties, but your home, utilities, and legal status remain unaffected—at least in the short term. This distinction makes it clear why these debts can take a back seat when resources are limited.

Prioritizing essential obligations protects your well-being.

Paying off priority debts first helps ensure that your fundamental needs—shelter, heat, light, and legal security—are safeguarded. It’s not just about financial planning; it’s about preserving your quality of life. By tackling the most critical debts first, you reduce the risk of crisis situations and gain the stability needed to deal with other debts more effectively.

Debt Management Solutions

Once your priority debts are under control, the next step is to create a realistic, structured plan for the rest. There’s no one-size-fits-all approach, but several debt solutions can help:

1. Think Money Debt Management Plan (DMP)

A DMP allows you to consolidate your non-priority debts into a single monthly payment. Think Money negotiates with your creditors on your behalf, potentially reducing interest rates and stopping fees. This helps make repayments more affordable and consistent over time.

2. Debt Consolidation Loans

If you have several debts with high interest, consolidating them into a lower-interest loan can simplify payments and reduce costs. This option works best if you still have a good credit rating and stable income.

3. Snowball and Avalanche Methods

These are self-managed repayment strategies. The snowball method tackles the smallest debts first for quick wins and motivation. The avalanche method focuses on high-interest debts first, saving more money in the long run.

4. Budgeting and Expense Tracking

Sometimes, managing debt isn’t about finding new money—it’s about spending more wisely. Tools like budgeting apps or spreadsheets can help you track income, cut non-essential expenses, and redirect funds to debt repayment.

5. Credit Counseling

Speaking with a debt advisor or credit counselor can help you evaluate your options and pick the right path. They may also connect you with free services or government-backed support schemes.

Conclusion

Dealing with debt can feel overwhelming, but understanding how to approach it makes all the difference. By identifying the types of debts you owe—and recognizing which ones are most urgent—you put yourself in a position to take control rather than feel controlled by your financial situation. 

Focusing on priority debts first protects what matters most: your home, your essential services, and your peace of mind. Once those are managed, you can turn your attention to tackling other debts using structured strategies like Think Money’s Debt Management Plan, budgeting techniques, or consolidation options that suit your circumstances. 

No matter how challenging your situation may seem, remember: there is always a way forward. With the right plan, the right mindset, and the willingness to act, you can reduce your financial stress, regain control, and work steadily toward a debt-free future. The first step? Start today.

FAQs

1. Will using a Debt Management Plan affect my credit score?

Yes, enrolling in a DMP can negatively impact your credit score initially, as creditors may report reduced payments. However, it often prevents worse consequences like defaults or CCJs and may improve your score in the long term with consistent payments.

2. Can I still get a mortgage if I'm currently on a debt solution like a DMP or IVA?

Getting a mortgage while on a DMP or IVA is difficult. Most lenders prefer a clean credit history, and these solutions usually stay on your credit report for up to six years. However, some specialist lenders may consider your application after successful completion.

3. How can I avoid falling back into debt once I’m debt-free?

Build an emergency savings fund, stick to a budget, and avoid unnecessary borrowing. Regularly reviewing your financial habits can help maintain long-term stability and prevent relapse into debt.

4. Are there any government grants or support available for people in debt?

Yes, certain local councils and organizations offer Hardship Funds, Budgeting Loans, or Energy Bill Support schemes. Check your local authority's website or consult Citizens Advice for eligibility and application help.