Not that long ago general households had limited number of choices regards consumer credit opportunities. Far back, many state regulations have restricted different types of loans as well as interest rates financial institutions could offer to attract more customers.

However, now days new companies have entered the market and various innovative financial products and services were introduced.

Common Types of Loans:

• Secured Loans: are loans, which are secured by your personal assets. Such as automobiles, boats, properties and so on. If you don’t pay the loan back within previously negotiated period of time, the lender has the right to seize your assets.

• Unsecured Loans: are simply loans that are not secured by any collateral. This type of loan is also known as signature loan. Credit cards are the common examples of unsecured debts.

• Short-term Loans: are loans, with no more than three years in length. These loans are generally used to acquire small capital or goods. They have fixed interest rates and must be secured by your capital.

• Long-term Loans: are loans that vary in length but, which should be at least three years long. These loans must also be secured by your assets. The loans have variable interest rates and penalty fees.

Generally speaking, various types of debt exist. Starting from basic loans to bonds, syndicated loans and promissory notes. Large sum of owning money might also be secured through mortgage or other type of security interest over some of debtor’s assets (property for example). In this case, a creditor has rights over the assets if the debtor is unable to repay the debt.

Different types of debt are:

• Let’s start with a basic loan. It is an agreement to lend a sum of money for a period of time and to be paid on negotiated date. Most of the loans, also require an interested to be paid on the same date.

• A syndicated loan consists most of the time with a large sum of money, granted to various companies and organizations. Furthermore, a group of banks work jointly together to provide this type of loan for a client.

• A bond is a secure loan, that is issued by companies or governments. Most of the time, bonds are issued to investors when corporation wishes to borrow certain sum of money. Bonds have different lifetime, and at the end of bond’s life the money should be paid in full.

• Finally, a promissory note, also known as note payable, is a contract between two companies for a debt to be paid on a later period.

Always remember that bad credit and debt takes away from you more than just money. Furthermore, a large number of people consider bad debt and bad credit history as the bills to be paid and nothing more.

Well, they are wrong. Bad credit and debt don’t just eliminate your money but they also contribute to these four negative debt effects, which are:

• Loss of Freedom: when you are completely covered with debt, your opportunity cost significantly narrows. In other words, bad debt will eventually keep you from doing what you want. Whatever it is: playing with kids, listening to music, running with a dog. You will not be able to do it when you want and how you want to do it due to the debt.

• Loss of Cash Flow: this is the most obvious bad debt effect since you notice it right away when you run out of cash on hands. Once you cash flow decreases you will not be able to buy the life necessities with cash. Although you will be able to get the desired products and services by using your credit card. This practice is only going to increase your debt and your bad credit interest rate.

• Loss of Time: if you are in debt, then you must be somewhere, where you don’t want to be. A perfect example for this situation is a job. When you borrow money to buy goods and products you buy on credit. Once you buy on credit you spend your time in advance since you are obligated to be at your job placement to repay the debt. Therefore buying on credit eliminates your time.

• Loss of Opportunities: when different financial opportunities arise, it’s highly unlikely that you would be able to take advantage of them since you will be financially unable to do so.
  

In conclusion, always remember that once you eliminate bad debt and bad credit you will get your freedom, cash flow, time and opportunities back.

Once you borrow a certain sum of money you acquire a debt. Generally speaking, debt can be classified as either a good debt or a bad debt. It’s really important to understand the difference between both because knowing the difference could save your financial life. In short, good debts generally increase your earnings. While bad debts decrease your earnings.

In other words, it’s beneficial to have a good debt since it will increase your current financial state of affairs. Some examples of good debt are education fees and home mortgage. On the other hand, a bad debt will damage your current financial position. Examples of a bad debt are contentious credit card debt.

Whenever you need to determine if you have a good debt or a bad debt use to following chart to do it more effectively:

Characteristics of Good Debt:

• Beneficial long term investment (education, own property).

• Increases your cash flow.

• Helps you earn more money.

• Creates a sense of safety and security.

Characteristics of Bad Debt:

• Used for consumption.

• Decreases cash flow.

• Eliminates possible future earnings.

• Creates a sense of instability and insecurity.