Unsecured debt such as credit card balances and personal loans can amass quickly and leave you feeling overwhelmed. Though there is no way to instantly escape from unsecured debt, a well-formed strategy that encompasses several debt reduction actions can quickly and efficiently help you dig out and become debt-free.
Stop accumulating debt. Taking on new debt, either by using credit cards or by taking out loans, while attempting to pay down balances can minimize the effects of debt reduction measures and leave you feeling as if your efforts are not making a difference. If cutting out credit cards altogether is completely out of the question, limit use to a single card while freezing spending on all other accounts. In some cases, consolidating debt by transferring balances to a few low-interest cards can help make repayment easier.
Focus on Your Objective
Focus on both individual debts and the overall objective. Starting with the credit card or loan with the smallest balance, begin sending extra payments while submitting only the minimum amount due on other outstanding debts. Under this arrangement you get rid of unsecured debt one account at a time. However, don't lose focus on the overall objective of entirely paying off unsecured debt; it's too easy to resume spending or even take out new unsecured debts if you don't keep your ultimate objective in mind.
Make Frequent Payments
If you have substantial unsecured debt, getting rid of it requires more than simply sending a little extra with each payment. If you have disposable income you can use some or all of the excess funds to pay off debt. If you have little or no disposable income, you may need to take on contract work, sell unwanted items online or even get a part time job to generate additional funds to help pay off the debt. It's best to make payments as soon as funds become available; if you stash money in a checking or savings account rather than immediately paying on debt, you may be more likely to spend that money. As these small, frequent payments -- often referred to as "snowflake" payments -- add up, you can reduce balances and ultimately get rid of unsecured debt.
Consolidate or Negotiate
Though making several snowflake payments as soon as the money becomes available can quickly pay off debt, not all creditors allow this; your creditor may limit the frequency with which you can make payments. To get rid of unsecured debt with creditors who do not allow snowflake payments or that charge a fee to process these payments, consider consolidating these debts with a different lender. You can also try to negotiate with creditors to reduce interest rates or modify payment plans to help get rid of debt more quickly.
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