Americans as a whole have $830 billion in credit card debt, and the average American has a credit card balance of $6,200. Although these debts aren’t tied to essential assets, they typically have higher interest rates that can add up overtime. Learn more about unsecured debt and how to best pay it off.
What Is Unsecured Debt?
Unsecured debt is money you owe to a creditor that isn’t guaranteed or secured by an asset. Examples of unsecured debt include the following:
If you fall behind on unsecured debt payments, your lender does not have collateral to take back; instead, they can tack on late fees, increase your interest rate, and eventually send your unpaid balances to a debt collector. Credit cards, for example, are notorious for high interest rates. As you let your unsecured debt go unpaid, your interest charges and fees will start to add up, increasing your debt.
Secured debts, on the other hand, are debts tied to specific assets like your car or home. If you fall behind on secured debt payments, like your car loan or your mortgage, your lender can take possession of your car or house.
Unsecured Credit Debt and Your Options
As long as you pay back what you owe on time, you likely won’t run into issues with unsecured debt. Once you fall behind on payments, however, it can quickly grow to be a big problem. Fortunately, there are options for handling overwhelming debt and getting your finances back on track.
Debt consolidation is a popular management strategy that involves combining your unsecured debts into one monthly payment. This eliminates the need to keep track of multiple payment amounts, due dates, and creditors.
There are two main ways to consolidate unsecured debt:
- Consolidation Loans: These are personal loans that can be used to pay off your existing debt. After you use the consolidation loan funds to settle multiple debts, you will be left with the new, single loan to pay off over time. Although this strategy can help you reorganize your financial obligations, consolidation loans do not reduce what you ultimately owe.
- Debt Consolidation Services: A trusted debt relief company can work with you to consolidate your unsecured debts. After reviewing your financial situation, the company will help create an account under your name, into which you’ll make scheduled deposits. While you’re making those deposits every month, a negotiator will contact your creditors on your behalf and attempt to reduce what you owe. Once a settlement is agreed upon, you will use the funds in your account to pay the amount that your creditor and you have agreed upon.
Benefits of Debt Consolidation
The biggest benefit of consolidating unsecured debt is the reduced stress that comes with simplifying payments. Less pressure and stress can also help you feel more motivation to pay off debt and get back on track financially.
Is Debt Relief Right for You?
Before you consolidate debt with the help of a debt relief company, you should make sure it’s the right choice for you. Consolidating debt may be a good idea if you answer “yes” to any of these statements:
- I don’t think I can realistically pay off my unsecured debt.
- The stress of my debt is causing me physical or mental pain.
- I’m ready to commit to paying off my debt over the next few years.
Accredited Debt Relief - Your Unsecured Debt Solution
The debt consolidation professionals at Accredited Debt Relief can help you find the debt solution that’s right for you. With an A+ rating by the BBB, we’re committed to helping people just like you find solutions to their debt. Accredited Debt Relief can help you pay off your debt quicker, so you can finally take your first step toward financial freedom. Get a free consultation today!