Answer to this often (actually most often) asked question is “YES”

All you need is a little planning on your side, a lot of discipline and you will find yourself soon living a debt free life. I have seen people doing and have done successfully. Where most people fail is at the start. Yes, the important thing is to start, start somewhere.

1. Don’t even think of “New Debts”

Why am I telling this? Think for a second and it will be obvious to you that assuming a new debt really is counterproductive. You are trying to get out of a hole and do you really want to dig deep and do you think if that is going to help you? If it sounds silly to you, chances are you already got an “A+” for this, but I am talking to others.  There were situations which went seriously out of control, just by not following this piece of advice. It’s not doing any good to you, rather worsening the situation.  Debt as always snowballs and before you even realize it creates another pain point.

2. Spending habits – “ A Penny Saved is a Penny Earned ”

Saving money really is hard slog and happens a penny at a time. I am not asking your to be stingy or frugal, but just think before spending and take every opportunity to save. Eat well and stay healthy - no compromise on that, but start observing your spending pattern. Soon you will see a lot of unnecessary expenses and you can work on it. Plan, budget and do not over spend. If you have the habit of procrastination, use it to your advantage and push all the unwanted spending for later.  (I will write a separate article on Shopping/saving tips.).

Know the difference between wants and needs.  They are not the same.  Everyone may know this intellectually, but be honest to yourself when it comes to the things you purchase.

When you say “I badly need ______(fill in the blank)”, do you really mean it? Actually the meaning is “I really want _____(fill in the blank)”. So ask yourself the same questions a little differently. Something like this “Will I die if I don’t have ____?” or “Will I lose my job if I don’t have ___?”

Ask “Will I ______(fill in the blank with adverse consequences) if I don’t have (or do) ________(fill in the blank with your wants)?”. If you genuinely answered yes then that is a real need and you have to address it, else you should pass on.

3. Work more, Earn more

Take part time or second job and make more money. Ask for an increase in your salary. Or do anything that will increase your income.

I know a friend of mine, who was about to get rid of a lot of junk he had in his apartment. Someone suggested him to put in on eBay, eventually he got rid of those and even made some money, not to mention that he needs a smaller place to rent from then on. So be creative enough to find other ways to make money.

Conclusion:

Getting out of debt is easier than you think. Follow a plan, spend less, don’t borrow any more until you are paid off and be disciplined to follow the plan. You will soon realize that it’s easier and faster to get out of debt. These tips are just a prerequisite to debt elimination. Once you are on track, tackling the debt will become much easier. Check the other post on unsecured consolidation loans for debt consolidation options.

Don’t stop once you are debt free, follow this advice and create more wealth. The same secret recipes have made many wealthy and the same will make you too.

A perfect example of a secured loan would be your mortgage. The bank loans out money to buy a house - the house becomes the asset backing the loan. The bank or mortgage company can go behind the homeowner and foreclose on the property if they default on it.  So, the loan is secured (laugh! Not really with the 2008 CDO crisis) by the real property.

So what are unsecured consolidation loans?

It is this big loan that we end up getting into to pay off all the other loans without having to give any collateral.   In other words, it is the new loan that we take to consolidate the existing debt, without having any asset to back the loan up.    Unsecured debt consolidation is the exact opposite of secured loan.

So what would an exact opposite mean? The bank or the lending institution loans you the money without having any kind of real, valuable, or tangible asset to back the money that is loaned, and it can’t reposes any of your assets if you were to default. So, it’s basically your choice now, to either pay one big monthly payment or multiple small bundles that, when added together, would equal the big payment.

Now you are thinking, hmmm….there should be some catch in it, why would someone give an unsecured loan and run the risk of not getting paid.

On the face of it, one payment sounds easy. And to some extent that is true. Personally, I would like to make one payment and be done, and not have to worry about a few other deadlines, their corresponding minimum payments and other administrative issues.  But when you do consolidate, even though the monthly contributions are smaller when compared to all the small amounts combined, you end up paying more in the long term.  When you go with an unsecured loan, this is the real trap to watch.  It is something for you to think about.

There can be other issues that you might have to deal with when considering an unsecured loan.  There are situations where the total to be paid back in dollar amount is lesser with debt consolidation loan plan, but still takes a much longer time to payback.  You may also find that the consolidation is really hurting your credit score. (How it hurts your credit score is for a different post.)

But this will not always be the case, which is why you need to go with a good consolidation service. A professional debt management company should help (Check here for more Debt Help) you explain the pit falls that you might come across, the pros and cons of assuming an unsecured debt consolidation loan and steer you clear of a bad situation. If you have a poor credit and would like to consolidate you need to be extra careful and review couple of more times before getting in to bad credit consolidation loans.

Conclusion:
Unsecured loans for debt consolidation might be useful since the borrowers need not pay anything at the time of taking the loan. Unsecured debt consolidation loan is a helpful handy tool because the borrowers don’t need any asset to collateralize to get the money while assuming an unsecured consolidation loan.
Having said that, choosing the right debt consolidation loan, and the debt counseling or debt management service should be handled with care.  Always seek for a professional help before consolidation. There are brokers who specialize with debt consolidation and unsecured consolidation loans.  They might get you the best possible deal from the most appropriate lenders. Of course when lenders compete, you win.