If you find yourself swimming in debts and falling behind your payments, you must be frantically looking for a way out. If you would like to eliminate your liabilities without the help of a third-party then it is not a very easy task. Loans and credit agreements are generally differentiated into two key groups: secured and unsecured. A secured loan is one in which a creditor has a legal interest in your property and your loan amount is secured against it, whereas unsecured loan is a loan obtained without collateral. Knowing the difference between these two types of loans is the key for consumers who are looking forward to do it yourself (DIY) secured and unsecured debt elimination. However, remember if your personal negotiations with the creditors are unsuccessful, you may have to seek the help of a third party, Debt Settlement Company to reduce your debts.

Unsecured debts

Your unsecured debt incorporates the line of credit that involves no collateral to secure the balance. For example if you have huge credit card bills, medical bills and payday loan advances, they all come under unsecured debts. If you have robust credit score and a positive payment history, you can approach your lenders for a discount on your overall balance, on condition that you will pay the debts all at once. Once you realize that you are able to pay back the debt amount if the lenders reduce your debt loads, you can try to negotiate a lower interest rate or partial debt forgiveness by writing to your lender with an explanation of your current financial impediment and your willingness to settle the debts. By doing so you might be successful in lowering your debt by up to 60 percent.

Secured Debts

In order to get rid of a secured debt, sometimes you have to allow the lender to repossess the property that you offered as collateral against your loan. For example, if you default on your auto loan, the lender can repossess your vehicle or if you miss your mortgage payments, it could result in foreclosure. You can attempt to negotiate a lower interest rate and an extended repayment period with your creditors as well. In addition, you can also try to refinance the debt at more favorable rates or obtain a home equity loan to repay your secured debts at a low, tax-deductible interest rate. If none of these attempts succeed, the last resort is to sell the item you financed, and use the money to pay off your secured debt balance.

Final Thought

If you find it impossible to handle your secured and unsecured debts on your own, you are recommended to seek expert help from a debt counseling service. However, remember, according to the Federal Trade Commission you should thoroughly investigate about the debt counseling company via consumer reviews and complaints with your state attorney general office, as well as the Better Business Bureau before hiring a service. If you fall on the trap of a scam company you could end up doing more harm than good to both your credit report and your debt balances.