Debt
Debt – Get rid of it before you lose everything
Debt is any amount that you borrow from an individual or any organization. The amount has to be repaid within a specified period of time along with interest. Though no one likes to have debt, but almost everyone ends up having it at some time or the other. Debt is created when you take a home loan, take a student loan, buy anything on credit, etc.
Types of debt
Debts can be broadly divided into two types of debts which are mentioned below:
1. Secured debt – This type of debt is secured by collateral. It is called secured debt as the lender’s money remains secure because of the security that you keep against the debt. For example, mortgage loan, car loan, etc. When you fail to repay the debt, the lender takes away the security that you keep for the debt.
2. Unsecured debt – Unsecured debts are not secured by any collateral and if you fail to repay the debt, the lender cannot take away your asset. For example, credit card debt. With this type of debt the lender is more at risk of losing the money.
Eliminating debts
Debts, either secured or unsecured, can become a headache for the borrower as well as the lender, more so for the borrower. So, to avoid any harassment from the lender or to avoid losing your property, you should always try to repay your debts as soon as possible. Some of the tips to eliminate debt are given below:
• Reduce spending
• Start planning
• Don’t use credit
• Financial counseling
