Unsecured and Secured Debts
When it comes to debt consolidation, the type of debt generally being referred to is what is known as unsecured debt. An unsecured debt is essentially any type of debt that is taken out without any sort of collateral, such as a credit card or utility bill. In contrast, a debt such as a home mortgage is a secured debt with the house itself being considered as collateral should repayment not be made.
Common Unsecured Debts
Considering the different types of unsecured debts that can lead to the need for a debt consolidation program, the following is a list of the most common:
- Credit card debt: The debt resulting from unpaid credit card balances and failure to meet monthly payments.
- Department store debt: The debt resulting from the unpaid balance on any number of department store credit cards.
- Student loans: The debt resulting from the unpaid balance of loans incurred for the purposes of pursuing post-secondary education.
- Magazine/ CD club debt: The debt resulting from the unpaid balances on magazine subscriptions or CD clubs such as Columbia House.
- Tax debt: The debt resulting from the unpaid balance on money owed to governments with respect to income taxes.
- Medical/legal bills: Debt resulting from the unpaid balance incurred for medical or legal services.
- Personal loans: The debt incurred from the unpaid balance on personal loans taken out from a bank or any other financial institution.
- Utility bills: The debt incurred from unpaid utility bills such as cable, telephone, gas, heating, electrical or home insurance services.
- Collection agencies: The debt incurred from the failure to meet monthly payments on any number of bills that have subsequently been referred to a collection agency for repayment.