Many people in the US are feeling the impact of the pandemic on their wallets. As unemployment rates skyrocketed in 2020, individuals and families fell into debt that some are still struggling to get out of. If you are in debt, you’re not alone.
Whether it’s $500 or $500,000, there are options for you to solve your debt problem. But before you start paying off your debt, you should understand the different types of debt. Keep reading below for more information about common kinds of debt!
Different Types of Debt
Not all debt is created equal. Some forms of debt can increase your net worth, while others just increase your stress levels. Before you start paying off your debts, you should understand how they affect your life.
Medical Debt
Healthcare costs add up quickly, and for Americans who are uninsured or underinsured, medical debt can be a huge issue. If you have medical debt, don’t feel ashamed. Needing medical care is not a personal failing, and the Covid-19 pandemic has only increased medical expenses for many people.
If you have a large amount of medical debt, medical debt consolidation could be right for you. This will allow you to reduce your monthly interest, stop late fees, and pay off debt more quickly.
Credit Card Debt
The allure of a new credit card is hard to resist, but the appeal will quickly wear off when you start receiving bills in the mail. When you have a card, it’s best to pay it off in full every month. If you have a high balance on one or more credit cards, your credit score will be negatively impacted.
If you’re already struggling with credit card debt, try to create a personal budget. Aim to spend less on non-essentials and save more for debt repayment. If you have more than one credit card, focus on the one with the highest interest rate.
Personal Debt
There are several different kinds of personal debt. Secured debt describes debts that are attached to an object, like a car or a home. Unsecured debt describes debts like credit card debt, which don’t involve any such assets.
Among these debts, some are considered good and others are considered bad. “Good” debts, like mortgages, contribute to your overall net worth, while “bad” debts are debts that don’t increase your net worth. Car loans are an example of “bad” debts since cars depreciate in value over time.
Student Loan Debt
If you have a college degree, chances are you have some student loan debt. Attendance costs tend to be higher for private colleges than for public universities, but student loans affect all kinds of students. If you have federal loans, you probably have a lower interest rate than if you have private loans.
Depending on when you graduated and where you are now employed, you might qualify for student loan deferment or forbearance. This allows you to pause your loan repayments or to pay smaller amounts each month.
Start Paying Off Your Debt Today
Now that you’re familiar with different types of debt, it’s time to get to work. Identifying the kind of debt that you have is the first step towards becoming debt-free. Your journey has begun!
For more information on paying off debt, visit our site. We have information on debt collection lawyers, “good” and “bad” debt, and more.
