How to Reduce Secured Debt

Debt is money owed to another person or entity. This debt can either be secured or unsecured. A secured loan provides the lender with collateral; that is, something to use against your debt should you default on the loan. Secured loans are needed for large or risky loans. The riskier the loan, the more desire there is for security against default. If you have a large amount of secured debt, there are things you can do to reduce your secured debt.

Instructions

1

Pay off more of your loan. In general, banks need collateral when when the loan amount is high, which increases the risk exposure to the bank. The more you can pay down your loan, the less security you will need to provide for it. Start by making higher payments on your loan which will also help to reduce the amount of interest you pay in the long term.

2

Improve your credit rating. Collateral is commonly used for borrowers with poor or no credit. The best way to improve your credit score is to pay off your debts.

3

Pay a higher interest rate. Another way to compensate lenders for increased risk is to pay them more for the use of their funds. This means possibly being charged a higher rate of interest.

4

Obtain a co-signor. Some banks will give you option to provide a co-signor in lieu of security or collateral. The co-signor will have to sign all documentation with you.