Debt is common for many people, as people often have to take out a loan to purchase a home, buy a car or get some degree of education. Wherever there is an opportunity or place to borrow money, debt may be an automatic result. While there are many types of debt, there are common types that plague people for years.
Credit Card Bills
Credit card debt is one of the simplest types of debt that you can have. Some credit card companies require little background check for people who want a credit card. When someone purchase an item on the credit card, the fee will be charged with interest rates after a set amount of days, which can quickly spiral out of control. The interest rates differ for each credit card provider and it is common that people have more than one credit card in their wallets.
Medical bills can be expensive, particularly if people do not have health insurance to cover most of the fees. Health issues can be years in the making or can strike without any warning. If you do not have health insurance at a time of a health crisis, medical bills can easily pile up in terms of testing, treatment and hospital stays.
Whenever people need to buy a home, they often have to borrow money from the bank in order to pay the home in full. A down payment is often required, but the bank loan will pay for the rest of the home. Mortgage payments are payments made each month to pay off the rest of the home to the bank that has lent you the money. If you are laid off or terminated from your job, you may not be able to make your mortgage payments. Since the mortgage is already a debt in itself, missing payments will only make the situation worse.
Car Payments or Insurance
The same concept with purchasing a home applies to purchasing a car. A car may be purchased in full if the amount is present or on a banking loan. While the car payments need to be made on a weekly or monthly basis, the driver must also add car insurance and potential repairs to the bill. Missing car payments can also result in a debt situation.
Getting a good and credible education costs money and people will often get a loan to get that degree in order to get a good paying job. Over several years of education, the loan may add up to thousands of dollars. While the student may have a student interest rate during the education period, the interest rate may rise as soon as the person is no longer a student. The increasing interest rate can slow down the loan payments, if the person cannot make the required payments each month.
Based in Toronto, Mary Jane has been writing for online magazines and databases since 2002. Her articles have appeared on the Simon & Schuster website and she received an editor's choice award in 2009. She holds a Master of Arts in psychology of language use from the University of Copenhagen in Denmark.