Thirty-five percent of U.S. adults carry debt from month to month.
There are different types of debt, and each type has a unique impact on your financial health. Some types of debt are good, while others are not.
Here’s a quick look at the different types of debt and how they can cause money problems.
Credit Card Debt
Credit card debt is the most common type of debt and it’s often a result of poor money management skills.
You can get into credit card debt by using your credit card to make purchases you can’t afford and by missing payments. The interest rates on credit cards are typically very high and they can quickly spiral out of control.
Credit card debt is one of the most damaging types of debt because it affects your ability to qualify for other loans and credit products in the future.
Tax debt is a special type of debt that is created when you don’t pay your taxes.
The government can issue a tax lien against you. Then sell it off to private investors to recoup some of the money that they’re owed by you.
You can avoid owing taxes by filing your taxes on time each year and making sure that your payments are accurate. If you owe back taxes, contact a tax attorney today.
Student Loan Debt
Most people who go to college take on a few student loans.
A student loan typically comes with a low-interest rate and a set repayment plan. However, if you don’t pay your student loan debt back in full before the end of the term, it will go into default.
Defaulting on your student loans can damage your credit score. It can also make it difficult for you to find a job or rent an apartment in the future.
A mortgage is one of the biggest debts that most people take on during their lives. You can use your mortgage to buy a house, refinance your current home or pay off other debts.
When you take out a mortgage, it means that you are borrowing money from the bank or another lender and agreeing to pay them back with interest. If you don’t pay your mortgage, the lender can foreclose on your home.
This means that the bank will take possession of your property and sell it to recoup its losses.
These Are the Different Types of Debt You Can Have
Having different types of debt can be good or bad, depending on the type of debt and your overall financial situation.
The good news is that most types of debt are easy to get rid of, especially if you are struggling. The bad news is that some types of debt are very hard to eliminate and will follow you around for years.
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