Revolving Debt

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Debts comes in many forms. In the most basic terms, debt is something which is owed or borrowed. Creditors lend a sum of amount to debtors (those who borrow money) with the agreement that the money will be repaid and usually with an interest. A debt can be secured and unsecured, installment and revolving debt, and those debts which vary in the debt source.

Unsecured debts are debts that people take out every now and then, and which are also easily settled. Unsecured debts have no collaterals. One example of unsecured debt is your credit cards.

The secured debts have collaterals. When we say collateral, it is the security pledged as a guarantee for payment. If you transact a loan by pledging your car, house or whatever asset, it means you have a secured loan.

The next way to classify or to identify the type of your debt is to identify whether it is installment or …show more content…

Your payment fluctuates based on the charges or interests of the transactions you made. In this manner, you do not pay a fixed amount. This is an example of revolving debt. The total amount of your debt or credit may differ every month.

If making a choice between the installment and the revolving debt, it is safer to choose the first one. In installment debts, you are assured that your debt per month is stable. Given that you are paying for a house or car, you are rest assured that the price of that asset you bought will not increase the next months. Also, you will be able to budget the exact amount you are supposed to pay every month. This helps stabilize your monthly budget.

The last type may be classified by looking at the debt source. One good example for this is the credit card. They may be issued by a department store, a financial institution, a bank or an online service. It may be the same type of card, but it would differ in the services and usage. Likewise, the charges and interests of each card may greatly differ from one

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