When we talk about
debt, we usually think about the total of what we owe regardless of how it was
accumulated or who we owe it to. Payday loan debt included. While some of us
may define being in debt by our home mortgage or student loans, for others debt
may be determined by our past financial mistakes. No matter how much we owe,
how long it will take us to pay it back, or how we got there... it's all
considered debt. It's only when we look at each type of debt individually that
we can understand all of the different types of debt out there. It is then that
we can respect the fact that whether we owe $1 or $1 million, to family or
payday loan lender, that we are expected to payback what we borrow because it's
all considered debt.
*Mortgage Debt~ This
type of debt is defined by a first mortgage on a home, a home equity line of
credit, or any other type of loan that is secured by owing a piece of property
or real estate. A lien will be placed on the property until the loan is paid
off. This type of debt may come with an adjustable-rate mortgage (ARM) which
will increase over time over a fixed-rate which stays the same for the life of
the loan. With a home equity line of credit, which can also be considered a
"second mortgage", the lender is paid back only after the first
mortgage is paid in full. The average repayment term on a home mortgage or line
of credit is 15 or 30 years but there are 10 years ARM's available as well.
* Auto Loan~ Incurring
debt with an auto loan means borrowing a set amount for the purchase and then
paying it back over a fixed amount of time with a monthly payment (usually
24-60 months). The interest rate will be fixed for the life of the loan unless
the borrower decides to refinance for a lower monthly payment.
*Payday Loan~ Payday
loans are short-term temporary loans meant to help people out with emergency
financial issues or unexpected costs. They are unsecured with no collateral
necessary in order to be approved. Most lenders don't ask for credit history.
Borrowers are expected to pay back their loan with there next paycheck but
often times payday loan lenders will extend a person's repayment period.
Interest rates are higher than most loans and are fixed. The types of loans are
best for people who are able to pay back their loans quickly.
*Student Loan~ Most
often granted by the federal government, this type of debt is used for higher
education. Interest rates are usually much lower than other forms of debt and
repayment periods are usually 10 years, giving the borrower plenty of time to
graduate, find gainful employment, and payback what they borrowed. These loans
can carry extremely high balances depending on where the borrower went to
school, how many years it took them to finish their education, and how many
degrees they sought.
*Credit Card(s)~ This
type of debt comes from the purchasing of good and services without having to
pay up front. Creditors approve card holders for a specified amount in which
they can use on a revolving basis provided they make their monthly payment on
time and in at least the minimum amount required. Interest rates are based on
the borrower's credit score and can be some of the highest rates paid out of
all forms of debt.
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