Struggling making ends meet? Thinking you’re along when it comes to debt? Don’t worry you are not and I am going to keep this simple. In this post I am going to talk about –
- Two Types of Debt – Secured and Unsecured Debt
- What is Secured Debt?
- What is Unsecured Debt?
- The Main Difference in the Two Types of Debt
- 3 Ways to Start Getting Out of Debt.
Two Types of Debt – Secured and Unsecured Debt
Debt can be classified in two different ways. The two types of debt are –
- secured debt, and
- unsecured debt.
What is Secured Debt?
Secured debt is a debt that is secured by an asset or some type of collateral in order to secure the loan (i.e. incur the debt). Some examples of secured debt include –
- a home loan or mortgage – where the home is used as the collateral, or
- a car loan – where the car is the collateral.
What is Unsecured Debt?
Unsecured debt is receiving a loan or line of credit with no collateral. Some examples of unsecured debt include –
- Credit cards,
- Medical bills,
- Gym and health club fees, and
- Department store cards.
The Main Difference Between Secured and Unsecured Debt
The main difference between secured and unsecured debt is, if you –
- default on a secured loan, you lose your security, however you can walk away with not owing anyone anything.
- default on an unsecured loan, you still owe it until you pay it back and there can be consequences like lawsuits or collection agencies following you up.
3 Ways to Start Getting Out of the Debt
This is a big subject and one I cannot do justice to in a journal post. I have also realised through my own journey of underearning and getting out of debt, there are may emotions, experiences and faulty thoughts attached to money. However in saying that, 3 ways to start getting out of debt include –
- Stop Debting Now. Yes – stop incurring any more unsecured debt. This can be done by making a commitment and focusing on one step or one purchase at a time. A person who is in debt, cannot get out of debt by incurring more debt. This step is really important in transforming your relationship with money.
- Organising Your Debts. Writing down and organising your debt gives you clarity on what your situation actually is. Grab a piece of paper and write down all of the debts you have. Once you have clarity on your debts, you can start to make a plan to repay the debt.
- Start Tracking Your Income and Expenses. Tracking your income and expenses helps you to get clarity on your spending. Once you have tracked your income and expenses for a month, you can start to see if your spending is in line with your values and your goals for the future. Then you can make adjustments accordingly.
What are some other ways you have used to get our of debt?
I hope this post has given you some insight in to secured and unsecured debt as well as 3 ways to start getting out of debt. If you have any questions or comments, please leave them below.
If you are ready to reclaim your courage and take the next step towards freedom and opening your heart, why not join our Toolkit?
Leave A Response