Your Level of Debt

The first step to managing debt is to find out exactly how much you owe. There are many different kinds of debt. The most obvious are things like credit cards and personal loans. These are unsecured debts. That means that if you can't afford to keep up with the repayments, the creditor can't come over to your house and repossess things.

Another type of debt is secured debt. This includes things like mortgages and car loans. If you don't make the repayments on time, the creditor has the right to take away the collateral in place of repayments. You can lose your home or car.

Medical debt is a form on unsecured debt, but it's slightly different from personal loans or credit cards. Hospitals are usually more willing to negotiate when it comes to medical debt. However, if you don't talk to them about financial problems and just ignore the bills, the hospital can pass on your debt onto a collection agency. Debt collectors are not known for their generosity and patience.

Student debt is another form of unsecured debt. It's very difficult to get rid of it without paying it off. Even if you file for bankruptcy, you may still be liable for that debt. Student debt is a form of investment debt. By borrowing that money, you're investing in your future career. It's considered to be “good debt”.

Debt can be categorized as either installment debt or revolving debt. A mortgage is an installment debt. You borrow a set amount and repay it monthly, with interest. A credit card is an example of revolving debt. The amount you owe fluctuates as you use the card to buy more things, while making repayments.