The word debt is not a new or unique word for all of us. All of us come across debt in our life some way or the other. All the debts look the same but the truth is much different. Here are the classifications of the debt collection agencies that are quite popular in the financial world. Each of them has to be handled differently.
• Secured Debt
It is the most popular type of personal debt. It serves the collateral purposes of the parties. A lender must have the credit check. It allows the parties involved to keep track of the past performance. The lender is on the safer side because in case the borrower does not return the money lent, the lender can easily hold the assets. Thus, it is because of this feature it is known as the secured debt.
• Unsecured Debt
Unsecured debt is another popular type of personal debt. Here the lender provides financial assistance but without holding any asset. An agreement is signed under which the terms and conditions of the money are discussed. The borrower has an obligation to pay back the money as decided by the contract. In case this does not happen the lender can go to the court for handling the matter. The popular subdivisions of this type include signature loans, medical bills and gym membership contracts.
• Revolving Debt
Revolving debt is a unique kind of debt. In this kind of debt, the consumer takes a considerable amount of money against the recurring basis. The credit card falls under this category. Here the consumer has the ease to use any amount until he reaches a particular limit. Once this maximum limit is reached the consumer can no longer use the credit card. The amount differs according to the funds. It is both classified as secured and unsecured.
The globally most used debt is the mortgage. It is carried by a huge number of consumers. They serve a different purpose. The most quoted purpose is the buying of the homes. Here the real estate serves the purpose of being the collateral. The interest rate is often lo. The amount taken as the loan is subject to taxation as well. They are for a longer period of time usually being 15 to 30 years. In this way, things remain easy for consumers without bothering their regular expenditure.