Unsecured Debt Help

If you have piled up a lot of unsecured debt and are frustrated and stressed about dealing with this problem, there are some helpful solutions you should consider.

Credit Counseling

Credit counseling is a process that educates you on methods to make improvements in your high-debt problem. Credit counseling companies provide this service, however, their primary function is to help you pay off unsecured debt faster. A credit counseling company negotiates lower payments with unsecured debtors by lowering interest rates, often getting add-on fees eliminated and, in some cases, lowering the principal amount. You make one monthly payment to the credit counseling company and they in turn make payments to your unsecured creditors.

Self Negotiation

Another option is to work on the debt reduction process on your own. First, make a list of all of your debts with the outstanding amounts and interest rate. Prepare a monthly budget with income and expenses. Separately list your unsecured debt. If you have some funds available, call one or more credit card companies and determine if you can make a lump-sum payment for less than the outstanding balance. If they don't agree to that, or you don't have the funds for a lump sum payment, tell your credit card companies that you need a lower interest rate because you got a better deal from another credit card company.

Fast Track Method

The fast track method allows you to pay down your debt more quickly. After listing all of your credit card debt, pick the one that has the lowest balance and focus on paying that off as quickly as possible while you pay the minimum on your other cards. When the first card is paid off, start making additional payments on the next lowest card. Use the payments from the first card you were paying on to add to the next lowest card until it is paid off and so on. The cumulative approach of this strategy can accelerate your debt reduction process.

Debt Consolidation

Another option is to take out a home equity loan and pay off all of your unsecured debt with the home equity line. One advantage of this approach is that you can reduce the interest rate you will be paying and will only have to pay one company. A disadvantage is that the debt will now be secured and your house could be at risk if you don't pay this loan off.