What are the different types of debt?

Falling into debt in New Jersey is relatively easy, but getting back out can be much harder. One important step in figuring out how to pay back your debt is identifying different types of debt. 

According to FindLaw, not all debts are the same, and some have harsher penalties for defaulting or falling behind than others. In order to prioritize which debts to pay off first, you need to recognize the different types of debt you may owe.

Student loan debt

People borrow student loans to pay for educational expenses at the university level. They are very common, and many student loan companies offer flexible repayment options. 

Back utility payments

Utilities are public services provided for a fee and used to run your household, such as electricity, water and natural gas. If you fail to keep payments current, the utility companies may cut off services, although they may tolerate a few missed payments.

Back taxes

Though you may face huge interest rates on unpaid taxes, you can sometimes negotiate a payment plan with a tax collection company to pay down the debt. Because tax collection agencies take tax debt seriously, you should take it seriously too.

Back child support

As a parent, you have a legal obligation to provide for your child financially, so failure to pay child support, including making only partial payments, can incur harsh penalties.

Secured debt

Secured debt includes car loans and mortgages in which the lender has an ownership interest in the property and can repossess it if the borrower falls behind on payments.

Unsecured debt

Lenders do not have an ownership interest in unsecured debt, such as medical bills or credit card debts, so they cannot repossess any of your property, but they can charge late fees or raise your interest rate if you fall behind on payments.

The information in this article is not intended as legal advice but provided for educational purposes only.

 

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