What Are Common Types of Debt?
Remember debt is money borrowed that has to be paid back usually with interest. Below are the most common types of debt:
A loan is a set amount of money you borrow for a variety of reasons. It can be an auto loan to purchase a car or student loans to pay for higher education.
Regardless of the type loan you receive, you have to repay it by a certain date. Additionally, each loan has specific terms that you must comply with and it has a set amount of interest that you are required to pay.
Personal loans are money borrowed that can be used for almost any major purchase. For example, you can get a personal loan to purchase a boat or cover a wedding or vacation.
They are debt that is used to purchase real estate. This debt is paid over long periods of time, usually between 15-30 years and it tends to be the largest amount of debt people take on in their lives.
Of course, credit card debt is another common type of debt. If you want to learn more about credit, please check out our previous blog post titled, “The Importance of Credit Building.”