Different Types Of Debt

Debt is a normal part of all of our lives, but can be a burden on our everyday functioning. It comes in many forms however, so we decided to take a deeper love. This is an examination of different types of debt.

Mortgages

This is a loan from a bank or building society that lets you buy a property. You then pay back the amount you have borrowed plus interest over a period of around 25 years, although you can take them out over longer or shorter terms. The mortgage is secured against your property until you have paid it off in full. Over £245 billion was borrowed for mortgages alone in 2016 in the UK. Value-wise, this is clearly the most significant sector of debt in any economy.

Different Types Of Debt – Loans

And this is where we come in. Loans are simple enough, they need no explanation from us. The range of titles used to describe them is vast however, as are the uses a loan can be utilised for. Always ensure before taking out a loan that you are fully confident in making timeous repayments in full.

Different Types Of Debt – Credit Cards

An item virtually all of us will have.Credit cards are so popular because of their flexibility. They allow a buy now, pay later mentality to prosper. You can get endless deals on them that let you avoid interest charges and get extra rewards the more you use them. They can be very dangerous, as all deals must end at some point. Many are trapped in debt with credit cards.

Overdrafts

Another common product, most bank customers will have the option of an overdraft. Many will use it. Soon though these safety nets will be much less attractive. 40% interest charges on overdraft facilities have been delayed due to Covid-19, but they will arrive soon enough. We recommend you avoid overdrafts in future if at all possible.

Pay Later Deals

Many utilise payment plans that many retailers offer. These can range from monthly repayments, to loading onto a loyalty card for payment at an unspecified later date. Many of the offers are extremely enticing, as they offer little or no interest charges.