Martin Lewis’ top tips on how to clear your debts in January

MILLIONS of streched households are about to start the new year with a financial hangover - but according to Martin Lewis there are ways to clear all your debts now.

Some 7.9 million Brits are expecting to fall behind on their bills this month after the expensive festive period.

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While 16 per cent up of people said they were likely - or very likely - to fall behind with their finances in January, as a result of Christmas spending, according to the debt charity Money Advice Trust (MAT).

That compares with 11 per cent in a similar poll done last year.

To help, MoneySavingExpert's founder is urging people to make new year's resolutions to get their finances in shape for 2018.

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In his weekly , Martin Lewis shared some tips on how to cut the cost of all your debt:

Identify the debts that need paying off urgently

Martin Lewis is advising households to prioritise repaying the costliest debt first.

That's the one with the highest interest rate, as it will grow the fastest.

He said: "Use all spare cash to clear it and just pay the minimum on everything else. Once it's clear, focus on the next costliest."

Cut credit card costs by getting up to 38 months at 0 per cent

This is all about balance transfer deals, according to the MoneySavingExpert.

A zero per cent balance transfer credit card will charge you a transfer fee but won't charge you interest on the sum of money you move for an agreed amount of time, usually over years.

This means you owe the new card but at a far lower rate.

But since the Bank of England raised the base rate to 0.5 per cent from 0.25 per cent in November, banks have been following the guidelines and putting their own rates up for borrowers.

This means it's getting harder for people to borrow money and some of the best deals on offer dropped the free interest rate time period from 43 months at the beginning of 2017 to 38 months today.

And with another possible base rate rise on the horizon for 2018, Mr Lewis is urging Brits to act now.

Most balance transfer cards will charge a small fee when you make the transfer, so Mr Lewis advises to always go for the card with the lowest fee within the time you know you can pay it back in.

If in doubt, go long, even with a bigger fee.

"Calculate how long you think you'll take to clear the debt, add a bit for safety, then pick the lowest fee within that time. Where cashback is available, especially for smaller transfers, take that off the fee," Mr Lewis said.

You can also use MSE's  which shows which of the top cards you're most likely to get first.

Shift store card debts to 0 per cent too

Store cards are a type of finance agreement that lets you buy items in certain shops and pay for them later.

According to Mr Lewis, they are just like credit cards but with a far costlier interest rate.

Just as with credit card he advises shoppers to balance-transfer the store card deb too, then pay off in full before the 0 per cent balance transfer period ends.

Cut overdraft costs to 0 per cent (and get paid to do it)

Overdrafts are a debt like any other and need to be managed.

Mr Lewis advises to start repaying the money owed to avoid dread bank charges for going over limit.

Some banks offer decent options for cheaper overdrafts - but you must be able to pass a credit check to get them.

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According to the MoneySavingExpert, you can either switch to a 0 per cent overdraft account.

This includes , which gives £100 to accepted switchers which should help clear some debt. It also gives a £250 0 per cent overdraft.

Another alternative is , which can offer a far bigger 0 per cent overdraft depending on your credit score.

Cut big personal loans to 2.9 per cent

The first question to ask is whether a new loan can help you clear your current one and save, according to Mr Lewis.

To figure the answer you need to follow three simple steps.

• Ask your current lender for a settlement figure. This is how much it'll cost to repay your loan in full now
• Work out how much it'll cost you to stay where you are. Check what your monthly repayments are and how many you have left.
  If you don't know you always can ask your lender. Then, you'll have to multiply the two to see how much it'll cost you if you stick.
• Find the cheapest new loan for the settlement figure. You can use MSE's Loan to find out which is your the likely cheapest deal.

Should I try to clear my student loan?

In many cases it's better to just leave it according to Mr Lewis.

An investigation by MoneySavingExpert (MSE) revealed that over 100,000 university leavers across the UK could be in line for a rebate because they started repaying their loans too soon after leaving uni.

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 revealed that over the past three years, some 103,290 university leavers across the UK have prematurely seen deductions on their pay slips.

But graduates don't actually have to repay their loans until the April after they leave university, regardless of their earnings.

This means that if you're already repaying your loan, you could get your cash back.

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