At some point in our life we end up accumulating certain types of debts. And whatever the case, it is always best to liquidate it as soon as possible. However, have you ever wondered what types of debt exist? Is there any debt worse or better than another? Can we take the reins of our finances again when debts seem to have won the battle? From Point Credit we want to solve these doubts with you. Let’s get started! see wirelessnetproviders.com for further notes
Different types of debt
Among the different types of debt that exist we can find:
These debts should be the most normal. In fact, all debtors would like this to always be their type of debt. Subsistence debts are those that we contract to be able to reach the end of the month. But doing it without frills. For a debt to be considered subsistence it must:
- of serving to cover basic needs. That is, supplies, mortgages, transportation…
- The debtor does not devote the rest of his capital to making superfluous expenses. For example buy a very expensive piece of clothing or make a mini weekend getaway.
It is common for workers whose salary is not enough to live to contract this type of debt. It is usually common in large families whose incomes are not very high. Today, unfortunately, in Spain it is quite common since there is an increasing number of poor workers.
This type of debt is undoubtedly one of the most dangerous we will have to face. It is the one that probably your parents have repeated to you again and again that you do not contract: the one for which you seek to live above your means. That is, those that we contract with the intention of having a day to day above what our income allows us. For example buying a car far superior to our real economic capacity. These types of debts will only give you problems and end up ruining you.
We talk about this debt when money is used to invest. This can be both negative and positive.
For example, we would talk about a debt to invest positive in the case of acquiring a property with a successful mortgage with the intention of renting it and covering the mortgage in addition to obtaining profits.
We would talk about a debt to invest negatively in case of investing in high-risk markets (for example the Stock Exchange) with very high and short-term value variations.
This type of debt can be interesting but you have to acquire it with a lot of head and thinking about business opportunities. It is the only type of debt that will allow us to generate long or short term benefits.
We refer to those small debts that we are generating here and there to face the day to day. These debts are born due to a bad administration and control of our personal finances. You may ask a friend or your parents for some money. It is likely that one month you will request an advance on part of your salary. You may ask for a quick tiny credit to spend a month. Good personal finance management prevents these debts from appearing.
If you found this article interesting about the types of debts.
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