Debt can come in many forms. Below are just 10 of the different types of debt you can accumulate and how to manage them.

Credit cards

Credit cards are one of the most convenient forms of borrowing. They can also be one of the most expensive and persistent forms of debt.

Too many people consistently max out their credit cards, which can negatively affect one’s credit score and lead to higher bills. It’s better to try to use no more than 30% of your credit limit if you can – use it to pay off those smaller expenses rather than the bigger ones.

Personal loans

Personal loans can be taken out for all kinds of reasons from covering emergency repairs to covering bills. 

You should only take out personal loans as a last resort. For types of debt like this always shop around to find the best interest rates. It’s not a good idea to have multiple personal loans on the go – consolidating these loans could be worthwhile for making them easier to manage. 

Business loans

Business loans are any type of loan taken out for business purposes. 

When setting up a business, it’s a good idea to set it up as a limited company and take out all debts in the company’s name. If these debts get on top of you, you will then not be personally liable for these debts. As with personal loans, always shop around for the best interest rates.

Arrears

Arrears are debts accumulated from not paying bills. They include rent arrears, council tax debt and energy bill arrears. 

Arrears are typically avoided through strict budgeting. These can be some of the most serious debts – fail to pay them off and you could be taken to court, have services cut off or even evicted. 

Car finance

Car finance is a form of debt used solely to pay for a car (usually through a dealership). Unlike a personal loan, the car is often used as collateral and you do not fully own the car until the debt is paid off.

It’s important to keep on top of car finance if you don’t want your car to be repossessed. Personal loans may have advantages in some cases as your car cannot be used as collateral, although monthly payments may be more. 

Mortgages

Mortgages are taken out when buying a home or any other form of property. The property is used as collateral. 

Most people rely on mortgages to get on the property ladder. When taking out a mortgage, it’s often worth talking to a mortgage advisor to help you find the best deal. Remortgaging can be a way to save money if interest rates get too high. 

Student debt

Student debt is debt to pay for studies. Such loans are often provided by the government (although you can take out student loans privately).

These debts do not have to be paid off until you start making a certain income and may even be wiped after a certain number of years. That said, they’re still an important debt that you need to budget for if you are liable to make repayments. 

Overdrafts

Overdrafts are typically offered by banks, allowing you to dip below £0 until you reach a certain limit. 

They are useful to have, but should not be relied upon. Deep overdrafts of £1000 or more can be hard to get out of once you reach the bottom, and you may want to consider reducing these once you’ve got out of your overdraft. 

Instalment payments

Some companies will allow you to pay for purchases in instalments. You may not have to pay any interest, making them much better than a loan.

Instalment payment plans are not always initially offered, so you may have to enquire about them. Paying far in advance with purchases like holidays and cosmetic treatment can often get you better deals. 

Loans from family and friends

It’s possible to borrow money from friends and family. Friends and family typically won’t charge interest and may allow you to pay back the money more flexibly. You also won’t need to pass any credit check for types of debt like this.

Of course, not paying back these loans can put a strain on personal relationships, so you need to be careful when relying on these loans. They’re typically only suitable as a last resort.