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- Eliminating Unsecured Debt Quickly
Eliminating Unsecured Debt Quickly
- By Real Financial Goals
- Published 04/13/2007
- Credit & Debt
- Unrated
Most Americans are carrying a large amount of unnecessary revolving unsecured debt that can and should be eliminated from their financial lives. Unsecured debt can put your entire financial life in jeopardy should you be laid off or have some health emergency that precludes you from working. The best thing you can do for yourself is to eliminate debt from your life permanently.
It is imperative to determine the quickest and most efficient method to eliminate debt without filing for bankruptcy (which should hopefully NEVER be considered). It’s impossible to say exactly how long it will take to eliminate your debt, since individual circumstances vary, but if you follow the method below you will be enjoying financial freedom sooner than you ever thought possible.
The first step is to gather all of your unsecured statements including credit cards, personal loans, lines of credit, overdraft accounts, and even medical bills. Create a list of all of your creditors, ranking them in order of interest rate, lowest to highest. You typically will want to eliminate your high interest debt first, as it accumulates faster than all the rest of your debt. However, some financial advisors recommend paying off a few smaller accounts first in order to build momentum as begin the process of eliminating your unsecured debt.
Now the real debt elimination begins. Starting with the current billing cycles, pay the minimum payments on all of your debts except the last one on the list (the one with the highest interest rate). Pay as much as you can to the highest interest rate creditor and repeat this process every billing cycle until that account is paid in full. Close each account as it is paid, and then move onto the next one. As you keep doing this you will be able to apply more-and-more funds each billing cycle and gain momentum, until all of your debt is eliminated.
Once you are done paying off all of your debt, you should put all of the money you were paying to your creditors into a savings account, brokerage account, or retirement account. It is important to prioritize your long-term financial goals such as retirement and college as you save. Consider consulting a financial advisor to assist you with your investment decisions as you set goals. You will be amazed at how fast your cash will accumulate once you are done giving it away to creditors. The next time that you need an item that you would have previously paid with credit, you will be able to pay cash instead. It’s a liberating feeling to know that you are no longer dependant on credit.
It is imperative to determine the quickest and most efficient method to eliminate debt without filing for bankruptcy (which should hopefully NEVER be considered). It’s impossible to say exactly how long it will take to eliminate your debt, since individual circumstances vary, but if you follow the method below you will be enjoying financial freedom sooner than you ever thought possible.
The first step is to gather all of your unsecured statements including credit cards, personal loans, lines of credit, overdraft accounts, and even medical bills. Create a list of all of your creditors, ranking them in order of interest rate, lowest to highest. You typically will want to eliminate your high interest debt first, as it accumulates faster than all the rest of your debt. However, some financial advisors recommend paying off a few smaller accounts first in order to build momentum as begin the process of eliminating your unsecured debt.
Now the real debt elimination begins. Starting with the current billing cycles, pay the minimum payments on all of your debts except the last one on the list (the one with the highest interest rate). Pay as much as you can to the highest interest rate creditor and repeat this process every billing cycle until that account is paid in full. Close each account as it is paid, and then move onto the next one. As you keep doing this you will be able to apply more-and-more funds each billing cycle and gain momentum, until all of your debt is eliminated.
Once you are done paying off all of your debt, you should put all of the money you were paying to your creditors into a savings account, brokerage account, or retirement account. It is important to prioritize your long-term financial goals such as retirement and college as you save. Consider consulting a financial advisor to assist you with your investment decisions as you set goals. You will be amazed at how fast your cash will accumulate once you are done giving it away to creditors. The next time that you need an item that you would have previously paid with credit, you will be able to pay cash instead. It’s a liberating feeling to know that you are no longer dependant on credit.