How to Eliminate Unsecured Loans

Unsecured loans can be eliminated through debt negotiation and other methods. Collateral, such as real estate, isn't required for an unsecured loan, making the elimination of the loan easier. Secured loans, such as an automobile loan, are harder to eliminate. For example, the only way to eliminate an automobile loan is to pay the debt in full. If you fail to do so, the lender can repossess the car and sell it at auction.

Instructions

1

Review your available cash in checking, savings and other investment accounts to determine how much you can spend on eliminating unsecured debts.

2

Gather your credit account statements. Make a list of your unsecured loans. Place the most delinquent accounts -- at least three months past due -- at the top of the list. Rank the loans with the highest interest rates first. The high-interest rate loans are costing you the most money in finance charges, and should be paid off as soon as possible.

3

Call your creditors. Unsecured debt that is past due by 90 days or more could be eligible for debt settlement offers, according to the SmartMoney website. The site reports that debt settlement allows you to pay off unsecured debt for less than the full balance -- typically 20 to 75 percent of the balance. Offer to settle your delinquent accounts by paying 20 percent of the balance. Keep negotiating until you have an agreement that you can afford. Get the details in writing before making payments.

4

Make payments in full to resolve your other unsecured debts -- or wait for them to become eligible for settlement agreements.

5

File for bankruptcy if it isn't possible to pay off the debts in full or through debt settlement. Chapter 7 bankruptcy can eliminate unsecured debt in just a few months. Chapter 13 requires a payment plan of three to five years. At the end of the payment period, any remaining unsecured debt will be discharged, or eliminated, according to BCS Alliance, a credit and debt website.