Types of Debt
Debt is unavoidable. The average Scottish household owes £13,000 in debt – and that figure does not even include their mortgage. The availability of cash through loans and credit has revolutionised the way we manage our finances. This new access to money can be a great way to help better our lives and provide for our children. However, manageable debt can easily spin out of control and start to hold us back rather than push us forward. This unmanageable debt is a problem that we can work through together making use of various legal and government legislated procedures.
While Types of Debt Can Vary Widely, We Can Generally Divide Them into Two Separate Sections:
Secured debts are taken out against an asset. For example, when you apply for a mortgage you take it out against your home. If you cannot meet your payments the bank will take the asset, in this case your home, and liquidate it (sell it) to meet the repayments. Secured debt allows those without a particularly strong credit rating to borrow, as the lender can instead focus on the potential value of the assets the loan is secured against.
Unsecured debt, however, is not insured against anything. If you, the borrower, cannot meet the repayments then they are forced to take less predictable action against you, such as suing for the money they are owed or even taking and selling your possessions. Since these loans are riskier for the lender, as they cannot simply sell your house in the case of a mortgage, or car in the case of a vehicle lease, higher interest rates are attached. This can cause a much bigger burden for the borrower and has more potential for becoming unmanageable.
We understand how easy it is for debts to get away from you, and have helped thousands of Scots across the country who are suffering from unsecured and unmanageable debt. Join Becky who described her phone call to us as the “best phone call [she] ever did” and contact one of our friendly and on-hand staff and take the first step in beginning your debt free life.