Debt is a normal part of most of our lives. It is problematic for many, but if handled correctly, is nothing to be afraid of. It comes in many formats however, which we thought worthy of further investigation. Here are the varied forms of debt.
Mortgages
This is a bank or building society loan that allows you to purchase a home. You then repay the loan amount plus interest over a period of about 25 years, though you can take them out for longer or shorter periods of time. The mortgage is secured against your home until it is fully paid off. In 2016, the UK borrowed almost £245 billion for mortgages alone. In terms of value, this is undoubtedly the most important debt sector in any country. It is perhaps the most important type of debt too, as few of us could afford to purchase a property without borrowing the necessary funds.
The Varied Forms Of Debt – Loans
And it’s here that we come in. Loans are straightforward enough that we don’t need to explain them. However, the range of names used to characterise them, as well as the purposes for which a loan can be employed, is broad. Before taking out a loan, make sure you’re certain you’ll be able to make on-time, complete repayments.
The Varied Forms Of Debt – Credit Cards
Almost all of us will have this item. Credit cards are quite popular due to their versatility. They encourage people to buy now and pay later. You can obtain infinite bargains on them, allowing you to avoid interest costs and get further benefits as you use them more. They can be quite perilous, as all transactions must come to a stop at some point. Many people are enslaved by credit card debt.
Overdrafts
An overdraft is another popular product that most bank customers will have access to. Many others will make use of it. These safety nets, however, will become less appealing in the near future. Due to Covid-19, 40 percent interest charges on overdraft facilities have been deferred, but they will be implemented soon enough. If at all feasible, we advise you to avoid overdrafts in the future. The pandemic has seen banks defer many new interest charge schemes, but normality should return soon, so the advice remains valid. They are far from the best way to carry debt.
Buy Now, Pay Later Offers
Numerous people take advantage of the payment plans that many shops provide. These can range from monthly instalments to placing funds onto a loyalty card for payment at a later date that isn’t stated. Many of the deals are very appealing because they have low or no interest rates. However, you must be wary when using such schemes. It may feel like free money to not have to pay for an item when you physically take possession of it. But like everything, it will have to be paid for at some point.
