Types of Debt
Unsecured Credit
For example: credit / store cards, overdrafts, personal loans, mail order catalogues. Credit is lent to you personally and is not specifically secured against an asset.Credit Cards
These can be an expensive borrowing method if you only make the minimum monthly payment. Always try to pay off the card in full to avoid unnecessary and sometimes extortionate interest rates. Many credit card companies offer a low introductory rate, however often reverting to far higher rates than personal loans after the introductory period ends.Credit cards and store cards are also known as 'revolving credit'. Credit cards often provide a higher level of consumer protection than paying with cash or debit card.
Overdrafts
Although bank loans are usually unsecured, it is still important to deal with them early because of the often punitive charges for exceeding your authorised overdraft limit, charges for returned cheques / direct debits etc.Overdrafts are also repayable 'on demand' - which means the bank can ask for its money back at any time. Some banks offer a portion of an overdraft interest free, however overdrafts are generally more expensive than loans; so do not use them as a way of borrowing money long-term.
Personal Loans
Generally the cheapest way of borrowing money, although a good credit rating is often required to borrow large amounts. If you can, cancel your credit cards and transfer the debt on to a loan. ...
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