BANGALORE: Getting rid of loans could help you become debt free. However, not all loans are easy to eliminate. Secured loans such as mortgage loans and automobile loans are backed by collateral. You must pay these loans off in full or forfeit the house, car or other collateral.

 Even then you could still be held responsible for a portion of the loan after the property is sold at auction. Unsecured loans, which do not require collateral, are easier to eliminate.

Let’s see how to avoid these loan traps:

1. Make Separate Lists

Make separate lists of your secured loans and unsecured loans. Get rid of the secured loans by accelerating payments until the loan balances are paid in full. Or, for a secured loan such as a house or car, sell the property and use the proceeds to pay off the loan. Add additional cash, if necessary, to pay the full balance.

2. Pay Off

Pay off as many of the unsecured loans as possible using your available cash. Choose other options if your cash is limited and the amount of outstanding unsecured debt is extensive.