How to Eliminate All Unsecured Debt

Unsecured debt includes credit card debt and any other loans that do not place a mortgage or lien on property. If you have a mortgage or secured debt, the lender can seize property to recoup his investment. Because the lender has no such recourse for unsecured debt, such loans carry a higher interest rate according to finance writer Jean Chatzky, author of Pay It Down. Eliminating all unsecured debt---which can carry interest rates often exceeding 20 percent---will ease the strain on your budget. Take steps to pay off these expensive loans so you will have more money for your other needs.

Instructions

1

Begin by listing your unsecured debts. Write down the lender, total amount, minimum payment and interest rate. Compute the total. Once you know the details of your problem, you can make a plan to address it.

2

Stop charging or borrowing. Let the size of your total debt motivate you to go on a cash basis. Keep careful track of your purchases, so you can stop buying what you cannot afford.

3

Reduce your interest rates. Jane Bryant Quinn, author of Making the Most of Your Money, suggests transferring balances to lower-rate cards. Also try negotiating lower interest rates with your lenders. Just call them and ask for a better deal.

4

Every month, pay as much as you can on your highest rate unsecured loan, and pay the minimum on all the others, Quinn says. When the first one has been paid, continue putting extra on the next highest.

5

Find more money to pay off your highest interest rate debt sooner. Quinn suggests selling stock, dipping into low-rate savings accounts or selling household items for a one-time big payment. Try also to find ways to cut regular expenses. Start carrying lunch from home or host a potluck instead of eating out. The Complete Tightwad Gazette author Amy Dacyczyn lists hundreds of ways to save money. You don't have to follow all of them, just find a few you feel comfortable with.

6




Live within your means and you'll be on your way to financial security.

Continue putting extra money on the debt with the highest interest rate until all are paid off. Quinn suggests posting your debt chart in a prominent place to showcase your progress. Stay motivated, follow your plan and find extra money to put on your debt every month. If you continue to live within your means, you will pay off your unsecured debts and be on your way to financial security.