TYPES OF DEBT

Unsecured Debt Help & Advice

Types of Debt

Unsecured Debt Help & Advice

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Understanding unsecured debt

An unsecured debt is a debt that is not taken out against an asset or covered by a guarantor. That means if you’re unable to repay the debt you owe, the people you owe money to cannot attempt to repossess any assets. However, it’s important to be aware that there are several other ways failing to make repayment can cause problems, such as damaging your credit score.

 

When the bills begin to pile up and money worries begin to become a worry it can be difficult to know which debt to prioritise over others.

People often tend to make more of an effort to repay secured debts – these are debts which have an asset attached such as a property – so they aren’t at risk of losing their assets. However, failing to keep up with repayments on unsecured debts can be just as costly and can have a serious impact not only on your credit score but also day-to-day life and your mental wellbeing.

Unsecured debts can be either personal or business debts and can include:

  • Credit cards: This is one of the most common types of unsecured debt across the UK. According to industry figures, the total average of credit card debt in the UK was £72.7bn in June 2019 – that’s an average debt level of £2,635 per household. Reports show that it would take 26 years and nine months to repay this staggering amount, making only the minimum repayments. There is no denying that the buy now, pay later aspect of credit cards can be useful when faced with unexpected payments but if you find yourself turning to the plastic to cover the cost of everyday life, debts can quickly become unmanageable.

 

  • Pay day loans: People who find themselves struggling with their finances or are beginning to find that their debts are unmanageable often turn to pay day loans to try and ease the burden. These loans come with high interest rates and a short repayment schedule, making it all too easy to fall behind on what you owe and only worsen your financial situation.

 

  • Past due bills: Utility bill debt is another common type of debt around the UK. There’s no denying that everyone must find the cash to cover the cost of essential utilities such as electricity, gas and water but sometimes covering these bills an be easier said than done for some people. Something as simple as misplacing a bill to an unavoidable price hike by your supplier can lead to financial problems.

 

  • Student loans: Scottish students are in the fortunate position that they don’t have to cover the cost of their tuition fees when studying in Scotland. However, for many taking on a student loan could be the difference between being able to make it through higher education or not. There’s often a misconception that students have more dispensable cash than they really do which is where dipping into student loans can cause issues.

 

  • Gambling debts: Compulsive gambling can have a major impact on day-to-day life, affecting both mental and financial health. It’s no secret that a gambling addition can lead to serious money problems. From being forced to cut back on essential items to being left without funds to cover the cost of bills, or funding necessities with an overdraft of credit card, are just some of the signs that your gambling habits are causing an issue.
 

How to handle unsecured debt

Although unsecured debt is common across the country, it’s important to understand that no one typically takes on debt they know they won’t be able to repay. But life is unpredictable and can change in an instant, making a debt that was once manageable a struggle to repay.

That’s why it’s important to consider not only your current circumstances but also look to your future when considering taking on debt. Planning ahead and ensuring that repayments fit into your weekly or monthly budget can help mitigate any future financial problems.

However, should you find yourself struggling with debt, it’s important to know that help is at hand. Carrington Dean is proud to offer a range of debt solutions to help you regain control of your debts, no matter how big.

We've helped so many others just like you.