There are countless ways that someone can get into debt. From falling behind on utility bills to forgetting about that catalogue product you bought last Christmas. In this article, we’re taking a look at some of the most common types of debts. It’s important that you understand which category your debt falls under, as this is the first step to understanding what the best course of action is when dealing with it. You might be being chased by a company like Moorcroft Debt Recovery, or perhaps you’ve just found out about a missed payment. Here’s a quick overview of each of the major types of debt.
Business Debts usually pertain to outstanding Her Majesty’s Revenue and Customs (HMRC) debts. It could be Income Tax, NI or VAT arrears. These are among the most serious type of debt and can lead to serious consequences if ignored.
Consumer Debt is perhaps the most common form of debt in the UK. It’s regulated by the Consumer Credit Act 1974 and covers a person’s rights when it comes to borrowing money, the action that creditors take when someone falls behind with payments and looks after you from unfair lending and debt collection practices. There are various types of consumer debt, including:
- Credit Card Debt
- Doorstep Loan Debt
- Overdraft Debt
- Personal Loan Debt
- Store Card Debt
- Store Finance Debt
- Weekly Payment Store Debt
- Short-Term Debt
- Catalogue Debts
- Guarantor Loan Debts
- Hire Purchase Debts
- Logbook Loan Debt
- Car Finance Debt
- Insurance Debts
Contract Debt is any kind of debt that’s been accrued through a contact such as a gym membership, TV package, Mobile Phone contract to name but a few. If you fail to make a payment or cancel the service early, it’s normal for the remainder of the contract to be paid. This is a common form of debt and many debt collection agencies will purchase these types of debts. If you are being chased by a debt collection agency please get in contact today.
Court Debts and Fines
These are any court fines which are ordered by a court of law. They are one of the most important debts to pay and can have severe repercussions including a prison sentence. If you’ve been ordered to attend a hearing, it’s important to provide transparent details of your financial situation as this will be taken into account. They are high priority debts.
Debts to other people
If you borrow money from a friend or family, it can often be a cheaper and simpler option to using a creditor. However, this can have an impact on your personal relationships as well as your finances. If you get into the situation where you can’t afford to pay them back, this can often be detrimental to not only your relationships but they could take legal action against you, which although is difficult to reinforce can lead to a variety of consequences.
Any debt which you owe to a government body such as child maintenance, benefit overpayments, tax debts and council tax are extremely enforceable and you will often find yourself in a sticky situation by ignoring them. They should be considered priority debts and if ignored you could face bailiffs, deductions from earnings or in extreme cases imprisonment.
This type of debt can include either a rented or owned property. If you fall behind on your rent or mortgage, this is classed as housing debt. It can be one of the most stressful types of debt and can lead to your property being repossessed or will lead to you being evicted. This should also be considered a priority debt.
Joint debts are when you borrow money or enter a financial agreement with another person such as a business partner or spouse. There are different kinds of joint debts including, loans, credit agreements and even bank accounts. Both people become responsible for the whole amount, no simply their half. If no one pays the debt, it can be a complex situation. If you’re effected by this type of debt and require advice, please get in touch with us to see how we can help.
Payday Loan Debt
Payday loans rose to prominence after the financial crash of 2009 and affected many people, with their massively inflated interest rates and the severe cost of falling into arrears. They were often used through an impulsive decision. They are short-term loans with high amounts of interest and are intended to be paid back over a short timescale.
Student Loan Debt
Most people in the UK who go on to higher education will have some form of Student Loan Debt. There are two distinct types of student loan debt, “old style loans” and “new style loans.” These are from before 1998 and after 1998. Each has different implications and different rules surrounding repayment.
Utility Bill Debt
Utility Bill Debt refers to any debt from gas, water or electricity company. These types of debts can sometimes lead to providers cutting off your supply so these should also be considered priority debts. There are various things you can do if you’re struggling to pay your utility debts find out more here.