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In this article we are going to explore some of the main types of debt that are offered to consumers and what the best uses of debt can be. We are often trained to believe that debt is bad and that, if possible, we should have zero debt. While having zero debt allows for peace of mind and an easier lifestyle, it is not necessarily attainable for most, and the reality is that not all debt is bad. Obtaining debt is much like gaining trust, it starts off small and incrementally gets larger as time progresses and more trust is built.
The largest amount of debt that most individuals will have in their lifetime is probably a mortgage. A mortgage is a term loan that allows an individual to purchase and own a home, using a fraction of the purchase price as the down payment. Financial institutions lend out mortgages to individuals and will use the physical house as collateral against the loan. This means that if the individual purchasing the home suddenly cannot make the mortgage payments or defaults on the loan, then the bank can repossess the property.
Your comprehensive guide to the world of borrowing, including terminology, the different types of lending, reasons to borrow and essential things to know before you do.