Some Random Thoughts About Consumer Credit And Debt

There are a few ways in which consumers can obtain debt. Usually debt is needed in order to make a specific payment of buy a specific product or item. In other times debt is more generic as consumers are in need for cash for many smaller purchases or just to run their daily life.

The most common product specific debts that almost all American consumers end up accumulating at one point of their life are mortgage debt to buy a house car loans to buy a car and college loans to pay for their education tuition. Some less common debt tools used by a smaller number of people are lines of credits that allow consumers a certain amount of debt money they can cash out at any time for any use.

Product specific debts are usually easy to get assuming that you have a descent credit history and credit score. If you did not go through Bankruptcy in the last seven years and were not delinquent more than once on your bills then you are most likely to easily be approved for a product specific debt. The debt terms might vary the main one being the interest rate on the debt according to high good your credit history is but the debt itself should be obtainable. When applying for debt some lenders would want to see you putting some cash toward the purchase. Most commonly seen in home buying debt also known as a mortgage is lenders looking to see the loaner putting a certain cash down payment on the house usually between twenty to thirty percent. The same is true when buying a car though usually getting a car without putting any cash is possible.

Another commonly used form of debt is credit card debt. Many consumers use their Credit Cards for temporary short term debt to bridge between periods of low cash flow. For example Credit Cards are used to make purchases while not having hard cash for example when waiting for your next pay check. Credit card debt however can be dangerous as it is very easy to end up accumulating credit card debt without realizing it just to find yourself not being able to pay off the credit card statement for a long time. Credit card debt is one of the most expensive forms of debts with Credit Cards companies charging a hefty interest rate on owed funds.

The Line of Credit is a less used for of debt. Lines of credit are more known and used in the business world although they are widely available for consumes too. A line of credit is a general debt. It is called a line of credit and not simply a loan since applying for debt and actually realizing it by asking for cash happen in two different times. With lines of credit a consumer can ask the bank to provide him with an option to get debt up to a certain limit and for a certain period of time. The banks would run the credit checks at the time of the applications. If approved the line of credit will have interest terms and a period set by the bank. For example the line of credit can be valid for one year meaning during that year at any time the consumer can call the bank asking to realize cash from that line of credit without any need for more credit checks or in many cases without the bank being able to refuse such a request.

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