Types of Debts

The most common types of consumer debt are credit card debt, home mortgages, home equity loans, car loans and student loans.  The good news is, most of them are good debts if used correctly. 

Other debt classifications are secured and unsecured debt. A secured debt is backed by collateral, or something of real value. A good example of a secured debt is a mortgage because the loan is backed by the value of the house itself. 

Credit card debt is considered unsecured debt, because there is nothing of value backing the debt, only the borrower's credit history. If the borrower can't make his credit card payments, he has to find a way to come up with the money, which could mean borrowing more debt like a debt consolidation per example. This is why credit cards and other unsecured debt are the most dangerous types of debt to accumulate because they are the worst to get out of and the consequences can be very harmful.