What is debt?

¡Hola!

If you are planning to…

• Pursue higher education

• Buy a car

• Purchase a house

• Start a business

You need to understand debt first! Debt is money borrowed that has to be paid back usually with interest. It can have a fixed payment due date or it can be revolving. There are different types of debt.

There is secured debt, or debt that is collateralized. Collateralized means that borrowers have to pledge something as security (e.g. money) for the repayment of a loan, and if the loan isn’t paid, the lender will take the security. Examples of secured debt include car loans, mortgages, and secured credit cards.

On the other hand, unsecured debt does not require any collateral. For this type of debt, the lender decides to grant the loan or credit based on the borrower’s credit score, and it usually has higher interest rates than secured loans. Examples include credit cards and personal loans.

Common Forms of debt include:

• Mortgages

• Auto loans

• Student debt

• Personal loans

• Credit Card

In the next blog posts, you will learn more about each type of debt, so please stay tuned!