Legal Ways For The Elimination Of Unsecured Debt

What’s the difference between secured debts and unsecured debts?

Secured debts are those that are lent out with a collateral. This kind of debt is advantageous to lenders because if the borrower does not pay his or her debt, the lender can seize the collateral to make up for the loss or to regain the lender’s money. The collateral can be the borrower’s assets, if not, then the borrower can have a co-signer for the loan. If the borrower cannot pay the loan, the lender can collect the remaining balance from the co-signer.

On the other hand, unsecured debts are debts that have no collateral when borrowing money to a lender. This kind of debts is lent out without any security. It is lent purely based on words and assurance of the borrower that he can pay the loan. However, one must have a good history of borrowing money to avail this kind of debt. Furthermore, unsecured debt has a higher interest rate compared to secured debt and is not good for long-term basis. It has higher interest rate to cover the risks undertaken by the lender because suing the borrower for not paying the remaining balance are both money and time-consuming. Some of the types of unsecured debts are business loans, personal loans, credit cards, and student loans.

How to legally eliminate unsecured loans?

  • Ask for help from your friends and family to lend you money for the payment of your debt. Tell them that you will pay with a good interest rate (but be sure that the interest rate will be much lower than the interest you would pay from your current lender). Thus, giving them a secure way of lending their money.
  • Seek for help from professionals or debt counselors. These professionals will advise you to pay more over the required monthly minimum rate so that your debt will be paid off in a shorter period of time. This will not only lessen the principal amount but also refrain you from paying so much of the interest rate. They can also help you negotiate for the reduction of interest rate, though, but still, you have to pay your entire debt.
  • Avail the services of a debt settlement company to eliminate unsecured loans quickly. The debt settlement company will help you negotiate with the reduction of your total debt. Note that it does not only cover the reduction of interest rate but also the principal amount that you have loaned. This is to let you save on the amount that you need to totally pay off your debt. So, get a professional help to eliminate your unsecured debts because credit companies prefer to talk to professionals and there’s a higher chance to have a successful settlement with their help.

Therefore, unsecured loans are only helpful for those who can pay their loans on time because they can have their loan immediately without a collateral.  Do not dive into this kind of debt if you think you can’t repay your loans on time, as it will only worsen the problem.