Types of Debt
Understanding Common Consumer Debts
As a consumer, the idea of accumulating debt can be a daunting but necessary part of building your credit. For some, accumulating debt can feel a bit like you’re digging yourself further into a hole with no ladder to climb out. The best resource to equip yourself with is the knowledge to familiarize yourself with your debts. Below is a list of the most common consumer debts most people have accumulated in their lives.
If you’re having trouble keeping current on your debt payments the Law Offices of Marshall D Schultz can help you create smart, individually designed, debt repayment options. Our lawyers have over 50 years of experience in this practice so even if filing for bankruptcy isn’t your plan, we can help you resolve your financial concerns.
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A secured debt has a form of collateral attached to it. The most common forms of secured debt are car loans and mortgages. What this means is, if you stop paying your creditor for your car loan or mortgage they could take your car or house away as collateral for the loan. With a secured debt, there is always something you risk losing if you fail to stay current on your loan repayment.
Unsecured debts do not have any form of collateral. The most common unsecured debt that consumers have is credit card debt. With unsecured debts, there is no property at risk when you default on your debt. This is why credit card companies will forward your debt to collectors in order to get their money back. Most unsecured debt tends to have higher interest rates due to the lack of secured collateral.
This type of loan is typically a student loan or a mortgage loan. Usually, you are able to deduct any interest paid on your student or mortgage loan on your taxes.
Fixed Payment Term
Debts that have fixed payment terms or fixed repayment dates can usually be the easiest to manage because the amount you owe does not change from month to month. An example of a fixed payment term would be a car payment. Usually, car loans have a specific monthly cost and last an average of 65 months.
Variable Repayment Period
Credit cards are the prime example of variable repayment period loans because the amount you are required to pay monthly changes depending on how much you owe. For example, if you only have a credit card debt of $500 your minimum monthly payment may only be $15. In the next month if you spend $1,500 on your credit card your minimum monthly payment could increase significantly.
This is where many consumers fall into trouble with their finances. If you’re using your credit card to pay for everyday bills and basic needs your monthly payments could quickly get away from you and it may be difficult to stay on top of your finances.
Our Detroit attorneys are here to help you when you need it. We’ve seen hundreds of cases like yours and we’re confident we can assist you in getting your finances back on track before having to file for bankruptcy.
Variable Interest Rate Debt
If your debt has a variable interest rate, this means that over the time of the loan your interest rate may change. A common example of a variable interest rate loan is a credit card. Many creditors will reel consumers in with the promise of 18 months zero interest on their credit cards, but then increase the interest rates way up to the high 20s after that time period.
For a consumer trying to manage their credit and finances, variable interest rates could prove to be problematic as the variation in interest rate could dramatically affect the cost of their minimum monthly payments.
Fixed Interest Rate Debt
Fixed interest rates mean the interest rate of your loan does not change throughout the life of the loan. Some examples of fixed-rate interest loans are mortgage loans, car loans, and banking loans. Often, your credit score can determine if a fixed or variable interest rate is available to you.
If you’ve been struggling to manage your finances, our qualified bankruptcy lawyers could help set you on the right track. We can help you determine if bankruptcy is the right path for you.
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