Debts - The Various Categories

Having debts surround you can be stressing. When you borrow money from a bank or a friend, you are always expected to repay with or without interest. However, sometimes you may have the intention of repaying but things don't go your way and you end up being indebted to the person or bank. There are various categories of debt.

Secured or unsecured debts are one category of debt. Here one debt has collateral while the other doesn't. When you have a secured debt, there is tangible evidence of an asset or property attached to the it. Should you fail to repay the debt, the creditor has the legal advantage of taking your property and may sell it to get back what is owed. On the other hand, one most common form of an unsecured debt is a credit card. There is no asset or collateral attached to the it. This is risky for the creditor because they have to rely on the debtor's credit history.

Debts can also be classified as revolving or installment debt. In this category, the manner in which the debt is repaid determines whether it is one or the other. With revolving debt there is no standardized amount of money being paid as the amount can reduce or escalate depending on how the charges are made in a particular period of time. A good example of revolving one is when you use a credit card. An installment one is where you make consistent amount of monthly payments, an example of this would be car repayments.

The source of your debt is another category. This applies especially if you operate different types of credit cards. The interest rates charged differs from card to card. Some may be lower than others, so always research thoroughly before you apply for a one.