Settle Debt - Types Of Debt & Debt Relief Options

If you are looking for ways to settle debt, then you have come to the right place. We at Settle-Debt.com strive to provide you the most accurate and up to date info on debt.

3 Basic Categories Of Debt

There are many ways people use to categorize their debt, but essentially there are 3 main categories. However, under each category, there will be other types of debt which can be quite confusing if you don't know how to identify them.

So, before looking at ways to settle your debt, you first have to understand which category your debt falls into.

1. Secured or Unsecured Debt :

Secured or unsecured debt are based on the presence of collateral for the debt. Collateral here refers to the security of the loan or credit. If the debt involves collateral in the process, then the debt is called a secured debt. For example, a car loan or a home loan is secured debt because a house/car is the security or collateral.

An example of an unsecured debt will be your credit card. If you take an unsecured loan from your bank, your debt is considered as unsecured.

2. Installment Debt or Revolving Debt :

Debt can also be categorized as installment debt or revolving debt. If you have to make a monthly payment for a certain amount like your car or house payment, the debt are considered as installment debt.

An example of revolving debt would be your credit card debt, since the balance will fluctuate or change depending on the different charges made throughout a specified time period. The total amount you owe will be different every month.

A more preferable type of debt in this case would be the installment debt because the debt amount is consistent will not increase unlike revolving debt. When you buy a house at certain price, the payments are fixed every month and you do not have to worry that the price will increase the next month. This will be easier for you to budget your expenses each month.

3. Source Of The Debt :

We also categorize debts based on the source of the debt. This is probably the most common of the three. Take credit cards for instance, a card may be issued by a bank, online service, or other retailers. But, it may still be the same type of card. Visa, Master Cards and American Express are all offered through these sources.

However, the interest rate charged will probably differ, for example, the rates offered by the banks might be lower than that offered by retailers. So, it is always wise to be informed on these differences when applying for a credit card.