People who live in Louisiana and struggle to find ways to avoid drowning in debt should make it a priority to understand the different types of debt and credit accounts they may have. This knowledge might give them insights into the best options for managing and reducing their debt.
As explained by U.S. News and World Report, some debt is associated with tangible goods in the form of collateral like an automobile loan or a home mortgage. These debts are called secured debts because the lenders have the security of knowing they may be able to repossess the asset if the debt is not repaid.
Other debts are not associated with any collateral and these are called unsecured debts. Examples of unsecured debt include medical bills, credit card balances and student loans. Interest rates for unsecured credit may be higher than for secured credit in part because of the lack of associated collateral and theoretical higher risk for the lender of not receiving repayment in some form.
Credit can also be referenced based on the terms of the repayment agreement. According to Credit Karma, credit accounts in which a person is granted a set amount of money up front and then must make monthly payments until the debt is completely gone are called installment credit accounts. Each monthly payment is an installment. Credit accounts in which people are allowed to use as much or as little of the allowed amounts as they wish when they need or want are called revolving accounts. Even if a balance is zero, the account remains open and the consumer may use the account again.