Many consumers think that all credit is the same, which results in them running into financial troubles.
Different kinds of credit or debt:
Creditors place a lien on your assets when you take out secured credit, which guarantees that you will pay it back. A lien gives them the right to keep the asset until the debt is paid. Accordingly, they can take the asset if you default on the credit agreement. Secured credit includes vehicle finance, bonds, mortgages and home loans.
When you take out unsecured credit you commit to paying back the borrowed amount on paper. The credit is not backed by collateral or surety. Unsecured credit includes credit cards, medical aid and utility bills.
When you pay off credit in instalments over a specific term, this is called instalment credit. Instalment credit includes car loans, student loans, mortgages etc.
Now, you know exactly what you’re dealing with when you take out these different types of credit or debt!