An unsecured debt is a debt that is not secured against any asset. It is the most readily available type of debt and comes in the form of credit cards, store cards, overdrafts, loans, payday loans etc... Credit lending companies make a lot of money from unsecured debt, because of the nature of it's ease of use, high spend, high interest and low repayment system. If you have unsecured credit at your disposal, it is so quick and easy to use when you don’t have the cash available.
The most popular type of unsecured debt that we find people have difficulty with, is in the form of Credit cards. Credit lending companies are constantly releasing enticing offers such as buy now pay later and 0% interest deals for short periods of time. If you’re not careful with using these types of cards or if you misunderstand the terms of the offer, then it won’t be long before you find yourself in financial difficulty with repayments.
Store cards can be even more deadly than Credit cards because of their high interest rates and constant marketing materials and promotions enticing you to spend more on the account. If you don’t repay in full then they will quickly accumulate interest and soon leave you in a trap of repaying them for a long period of time.
Overdrafts are another very common form of unsecured debt, usually offered from your bank or building society, as a buffer for when you don’t have money in your account. You are usually charged a fee for using your overdraft and then when your wages/income goes back into your account, the overdraft is repaid. The problem with overdrafts is if you get into the habit of using them and repaying them every month, you soon fall into a pattern where you are dependent on the overdraft facility as part of your income. So, depending on the amount of the overdraft, you never get to repay this and become free of it.
An unsecured loan is a form of credit that is usually taken out and repaid over a set period of time (usually spread out over several years). Interest and repayments are agreed at the time of obtaining the loan. The risk with these loans is you should be sure you can afford the monthly repayment amounts. If you run into difficulty and miss a payment, you could struggle to manage the loan.
Payday Loans are relatively new to the industry. They are a means of getting quick access to a low sum of money, but they also carry high interest rates and must be paid off the following month when the borrower is paid. They are generally aimed at people who do not have enough money to make ends meet each month. The problem with this type of borrowing is that you can very quickly and easily fall into a trap of living off payday loans each month. If you miss a payment you could run into trouble quickly with high interest charges and the inability to pay the money back, causing the debt to spiral. Payday Loans have recently been under media and government speculation regarding adding a cap to their high interest and charges.
If you're having difficulty with unsecured debts and you cannot pay them it is important that you address the problem as soon as possible. Chances are your debt problem will not improve without getting some help. All of our advice is completely confidential.Get help
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On our site you will find information on debt solutions, both formal and informal. We provide this information so you have a clear overview of the options available for dealing with your debts. We do not offer informal debt solutions, so if an insolvency solution is not your recommended course of action, with your permission, we will refer you to an appropriate agency/provider that can assist you further.
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