Types of Debt You Need to Know About

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Debt is a common phenomenon for many individuals, as many people often borrow a loan to buy a home, car or for educational purposes. Wherever a person gets an opportunity to borrow some funds, debt is inevitable. Although, there are various types of debts, some common types of debt afflict the debtors for years.

Some Common Types of Debt:

Credit Card Debt:

Credit card debt is the most common types of debt that many people owe today. Certain credit card firms need a bit of background checking for individuals who wish to have credit cards. When the individual buys any item through a credit card, fees are implied along with the set interest rates after a set number of days. This can swiftly go out of control. The rates of interest for credit card debt vary from one card provider to other and it is quite common to see people with multiple credit cards these days. This can certainly take a toll on their financial conditions.

Medical Bills Debt:

Medical bills at times can turn out to be very expensive if you lack a health insurance for covering most of your medical expenses. Health problems can strike at any time and are often unexpected. If a person lacks a proper health insurance in such a scenario, then medical bills are sure to become a burden on you.

Mortgage Payments:

Whenever an individual wishes to buy a house, he/she often has to borrow some amount from the bank or any financial institution. Here, the buyers always have to pay certain amount in advance termed as down payment and the rest through loan. Mortgage payments are paid every month to repay the remaining amount to the financial institution or bank from where you obtained the loan. In case you lose your job or your income source gets affected, then it will turn out to be a nightmare for you to make the mortgage payments each month. As the mortgage itself is a kind of debt, defaulting on payments will certainly worsen the situation.

Auto Loans or Insurance:

The similar concept of buying a home relates to buying an automobile too. Although you need to make the payments on a monthly or weekly basis, the driver of the automobile also needs to have an auto insurance to cover for the repair or any maintenance cost. Missing the payments may result in debt.

Student Loans:

Obtaining a credible and good educational degree comes at a price and thus, many students often seek for student loans to get admission in the desired educational institution. Over your course of education, the loan might pile up a hefty interest rate. Although, the students are liable for student’s interest rate during the time when they pursue their degrees, the rates of interest may soon shoot up immediately when you complete your education or degree. These inflating rates of interest can result in slowing down of monthly payments if the individual lacks enough funds to repay the loan each month.

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