Ask Bill your personal finance question

Getting a Debt Consolidation Plan with No Collateral

What's the best way to consolidate my debt with no collateral?

I have about $20,000 in unsecured debt. I make almost $60,000 a year, am single, and only pay $550 a month in rent. I am never late on credit card payments, but since I have to pay so much interest to so many different ones, I'm getting no where with them and am left with very little disposable income at the end of the month. What's the best way to consolidate my debt with no collateral?

Read full question
Bill's Answer
(6 Votes)

Debt Consolidation Options that don\'t require collateral

Thank you for your question about debt consolidation options that don’t require collateral.

When choosing a debt consolidation solution, match it with your financial situation. The most important criteria are your monthly cash flow, credit, and asset position. In order to make your debt relief solution work, make sure that you develop and maintain healthy financial habits.

Based on the information in your question it sounds like you have a comfortable financial situation, with good income and low rent. Before you search for the best debt consolidation tactic that does not require collateral, I am providing basic financial information that is essential to make your endeavors a success over the long run.

Follow these steps to find the best debt consolidation program for your situation:

  1. Make and maintain a budget
  2.  Use your credit cards wisely
  3. Choose from the debt consolidation tactics that don’t require collateral.

Make and Maintain a Budget

Given your economic situation, a strong income coupled with low expenses, you should be building equity and not just barely meeting you interest payments on you credit cards.

Your first step is to start, and then maintain a personal budget. Use the personal budget guide to get started. Your budget will include these points:

  1. List of all your expenses, by categories, including housing, transportation, financial, health, food and household goods, etc. Your list will include reoccurring expenses as well as one-offs and periodic expenses.
  2. List of your gross income, taxes, and deductions.

Pay special attention to your financial ratios, including your: 

  • Debt-to-income (DTI) ratio (total amount of debt payments divided by total income)
  • Saving ratio: total savings divided by gross income
  • Expense to income ratio: measure whether you are balancing your budget

Keeping and maintain a budget takes order and discipline, but will give you the advantage of being in control of your finances.

Use Your Credit Cards Wisely

Consolidate Credit Cards Without Collateral I am not sure why you have so little disposable income at the end of the month. Based on the information you provided, you should have no problem meeting your monthly expenses and having surplus funds to put in a rainy day fund, savings accounts, investment account and retirement account.

Many of us use our credit cards to bolster our income and spend beyond our real earning power. Other times, emergency circumstances leave no choice but to use the credit card. By building up a rainy day fund, you can avoid using your credit card in a case of emergency.

Here are some tips on using your credit cards wisely:

  • Pay off bills at end of month. Minimize the credit utilization to zero.
  • Don’t make credit cards an extension of your income. 
  • Don’t fall into the minimum payment trap. Here is an example to help your understand how much you will pay if you make minimum payments only. You owe $20,000, your credit card interest rate is 18% and the credit card company demands 2.5%. Your minimum payment is $500, but declines over time. It will take you 31 years and 10 months to finish paying off the credit cards. You total interest payment is $19,231.

In order to deal wisely with your credit card debt, learn about different debt consolidation tactics.

Choose from the debt consolidation options that don’t require collateral

Since your financial situation is strong, I would recommend considering these debt consolidation options that don’t require collateral.

Optimize your payments: Continuing with the example above, if you make fixed payments of $500, instead of the declining minimum payment, then you will pay off your $20,000 credit card debt in just 5 years and 2 months. You total interest charge is $10,722, saving you over $$18,000 in interest charges. Check out your debt with the minimum payment calculator. Most likely, you credit card interest varies from card to card. You can gain further benefits by either paying off you high interest cards first (financial savings), or pay off you low balance cards first (psychological savings). 

Balance Transfer: Shop around for a new credit card and do a balance transfer. Make sure that your savings are real, based on the transfer charges and the small print in the contract. Sometimes the low rate is just an introductory offer, and other times the rate goes up if you do not meet a certain payment schedule.

Negotiate new interest rates: Unless you are in a hardship, it is difficult to negotiate new terms.

Personal unsecured loan: A personal unsecured loan is a classic way of consolidation debt without collateral. However, you will need excellent credit and a low DTI ratio. Interest rates are not cheap, and start about 10.8% for a five-year loan. You will save more than by optimizing your payments, if you can get a lower interest rate. Make sure that you don’t run up your credit card balances.

Credit Counseling: If you find it difficult to keep and maintain a budget, then credit counseling will provide you with a professional framework to learn about personal financial management. You benefit from a professional who reviews, with you your situation, and provides you with educational tools. The second step of the credit counseling is a debt management plan. The debt management company negotiates with the credit card companies lower fees and interest rates. You make one payment to the debt management company, who funnels the payments to the different credit card companies. Make sure that you make all your payments on time, especially during the transition period. However, you credit report will include a notation that you are enrolled in a debt management plan, and this will harm your credit.

Quick tip
Not sure how to analyze your financial situation and come up with a debt relief option? The Debt Coach is an innovative tool, and easy to use. The debt coach will help you analyze your personal situation and give to you a recommendation based on five proven debt relief solutions


Many people need to look for debt consolidation options that don’t require collateral, because they do not own a home with equity, which allows them to take a cash-out refinance. Your situation sounds like an easy one to deal with. You can immediately rule out debt settlement or bankruptcy, two options for people either struggling or can’t meet their payments.

I recommend that you follow these steps to getting rid of you debt:

  1. Keep a budget.
  2. Use your Credit cards wisely. 
  3. Make Fixed payments on your credit cards. Then optimize your payment schedules.
  4. Look for additional debt consolidation options that don’t require collateral such as an unsecured personal loan or even you need professional help, credit counseling.

With patience and perseverance you will be debt free.

Get Debt Help!
(6 Votes)

People also like to Read

Daniel Cohen

Debt consolidation loans for bad credit are a limited and expensive option, if you have a serious debt problem. Instead, look... Read more >>

Betsalel Cohen

The best way to consolidate credit card debt | There are different paths to consolidate credit card debt. The cheapest is a m... Read more >>

Betsalel Cohen

Consolidate Debt | Review quick tips you need to know, before consolidating debt and credit, such as...... Read more >>

Daniel Cohen

Military Debt Consolidation | There are some key differences between consolidating debt when you are in or out of the militar... Read more >>


Recent Best
1500 characters remaining
  • BA
    Sep, 2009
    Thank you Mr. A. Keep checking in, and be sure to contribute to other debt blogs at Bill
    0 Votes

  • JA
    Sep, 2009
    Thanks for the debt advice.
    0 Votes