3 types of debt
By Drew Johnson on Thursday, October 18th, 2007 :: 12:07 pmCategory: Drew's Corner
It’s hard to find something new and interesting to say about debt. For most of us, it is part of the background of our lives. It doesn’t fascinate us; if we are lucky, it doesn’t pre-occupy us. Debt is a silent buttress to most of our financial lives.
While this is true for most consumers, debt takes on a more prominent role in the lives of others. For these consumers, debt more than buttresses their life – it is the foundation upon which their life is built or the trapdoor through which they fall to bankruptcy.
This article will focus on the three most common types of debt on the American financial landscape. The aim here is not to praise some for having one kind of debt and chastise others for having another, but rather to help you identify where you stand with your debt. Hopefully this article will help you realize that not all types of debt are bad.
The good
Good debt is any debt used as a financial investment. A home mortgage is one example of a good debt. This type of debt is usually secured with some kind of collateral, which garners the borrower lower interest rates.
The bad
Bad debt, as many readers are already well aware, is any unsecured, high-interest debt (like credit cards) used for short-term financial gain. This debt is “bad” because it is usually only a short-term fix to a long-term financial problem, and it usually costs much more in the long run than the amount originally borrowed.
The ugly
Debt that comes out of nowhere is ugly. Medical bills for an unexpected illness or injury can ruin your financial well-being. In the same category, credit card spending because of unemployment can set you back for years. These two types of debt are often major precursors to bankruptcy.
If you have found yourself in bad or ugly debt, consider a debt-relief plan today.
Author Bio: Drew Johnson is an expert in the various methods of debt reduction and has successfully reduced his own debt. Read additional articles by Drew on debt management, credit management and more.
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