Four Types Of Debt You Didn't Know Existed
Debt is often discussed as one thing, but there are four different types of debt you didn't know existed. Society wants to make you a slave to debt.
Debt is the money of slaves. Yet, many people in the United States have some form of debt. According to a Bankrate survey, 35% of Americans carry credit card debt. People are introduced to debt from a young age. It could be an influencer talking about how they use credit cards to travel or use them for the perks that credit card companies use to market their cards. It is also seen in encouraging young people to attend college, where many go into debt to acquire a piece of paper. There is also a connection between debt and suicide.
“Debt is the slavery of the free.” - Publius Syrus
“A man in debt is so far a slave.” - Ralph Waldo Emerson
“Modern slaves are not in chains, they are in debt.” - Anonymous
The goal of the financial system is to get you into debt. You want to avoid that as much as possible. Debt is a feature, not a bug, of the financial system. It’s by design.
The Four Types Of Debt
Secured Debt
When you borrow money from a bank, they ask you to give them something valuable in return, like your house or car, as a guarantee. They want to secure themselves with a physical item. That tangible item becomes collateral.
A lender will always make sure to check your borrowing history. It does not matter if you are financing a boat, car, RV, or house. Reviewing your borrowing history, the lender can determine your interest rate (money you will be charged for borrowing from the lender).
If you fail to make a payment or stop paying your borrower, the lender can take back the physical item you could not pay for through repossession or foreclosure.
You could pay a loan each month to a lender to use something, a car or RV. You could also choose to pay for it in cash. Purchasing a car or house in cash will be cheaper in the long run because you will not owe interest to a lender.
You could use the NerdWallet auto loan calculator to determine how much you pay each month. For example, let’s say you want to buy a used car that costs $30,000. You pay $4,000 upfront for the vehicle. Your average monthly loan payment for the car would be $756.97. With the loan, you will pay $6,000 more for your $30,000 used car. Your total loan payments total $36,334.74
By paying cash, you would have saved yourself $6,334.74. A loan may feel good in the short term, but it will cost you more in the long run than if you had decided to save up the money and buy what you wanted with cash.
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