Advice on debt often reduces to “pay off the highest interest rate first”. That is a sensible rule for comparing similar borrowings, but it ignores what UK law and practice treat as the most important question: what happens if you fall behind.
Priority and non-priority debts
Debt charities and the government’s MoneyHelper service separate debts by consequence, not by size.
Priority debts are those where non-payment can lead to serious outcomes such as losing your home, having gas or electricity cut off, a court order or, in a few cases, a prison sentence. They typically include mortgage or rent arrears, council tax arrears, energy bills, TV licence, magistrates’ court fines, child maintenance and tax owed to HMRC.
Non-priority debts include credit cards, store cards, overdrafts, personal loans and most catalogue or buy-now-pay-later balances. They still matter, and missed payments damage credit files, but creditors generally have to go through the courts for enforcement.
If money is short, the standard advice is to keep priority debts current first, even if a credit card carries a higher rate, and to talk to the non-priority lenders about a reduced payment.
Then compare cost
Once priority debts are covered, interest rates become the sensible guide. The effect is easy to underestimate. A £3,000 balance on a card charging 25% a year costs about £750 a year in interest if the balance does not shrink, around £62 a month that buys nothing. A loan at 9% on the same balance costs about £270 a year.
Some borrowing works differently. Student loan repayments in the UK are set as a percentage of earnings above a threshold and are written off after a set period, so they behave more like a tax than a conventional loan. Treating them like a credit card and overpaying is often not the best use of spare cash, although the right answer depends on the plan type and the borrower’s earnings.
A mortgage sits somewhere in between. Overpaying saves interest at the mortgage rate, which is a guaranteed return, but it locks money in the property. How mortgage rates shape monthly payments helps frame that choice.
Rules that change the picture
- Credit cards and Section 75. For purchases between £100 and £30,000 paid for wholly or partly by credit card, the card issuer is jointly liable with the seller if something goes wrong.
- Buy now, pay later. The FCA brought most BNPL products under regulation from 15 July 2026. For agreements taken out after that date, lenders must carry out affordability checks and customers can complain to the Financial Ombudsman Service. Older agreements sit outside the new rules.
- Time limits. In England and Wales, many unsecured debts become “statute-barred” six years after the last acknowledgement or payment, though the debt does not disappear and acknowledging it can restart the clock. Scotland has different prescription periods. It is worth getting advice before responding to an old debt.
When to get help
If bills are going unpaid or you are borrowing to cover other borrowing, free advice is available from StepChange, Citizens Advice, National Debtline and MoneyHelper. Be wary of firms that charge fees for debt management plans, since the same service is available free.
In England and Wales the Breathing Space scheme can give protection for 60 days from most creditor action, interest and charges, once a debt adviser has applied on your behalf, and there is a separate mental health crisis version. Longer-term solutions include a free debt management plan, a Debt Relief Order for people with low income and few assets, an Individual Voluntary Arrangement and bankruptcy, each with trade-offs for credit files and assets. The right option depends on the person’s income, assets and type of debt.
A short order of operations
- List every debt with the balance, rate, minimum payment and whether it is a priority debt.
- Keep priority debts and essentials current.
- Contact lenders early about hardship support; most are required to treat customers fairly.
- Pay off non-priority debts from the highest interest rate down, unless a small balance can be cleared to simplify things.
- Build a small buffer, as covered in building a practical financial safety net, so one surprise does not restart the cycle, and consider automating payments so they are not missed.
This is general information, not personalised financial or legal advice. Rules differ across the UK nations and change over time; seek free, regulated advice about your own situation.
Sources: MoneyHelper (Money and Pensions Service) guidance on priority and non-priority debts; GOV.UK guidance on Breathing Space and Debt Relief Orders; Financial Conduct Authority announcements on buy now pay later regulation; Consumer Credit Act 1974, section 75.
