In economics, personal debt is simply the sum owed by consumers to creditors. It includes debts incurred for purchase of consumable goods and/or don’t appreciate very fast. In economic terms, it’s a debt that’s used to finance investment rather than consumption. It’s the money that someone makes payments on instead of spending it on goods and services themselves. While a lot of people are aware of the term, very few truly understand its meaning and how it relates to our personal finances.
In basic terms, personal debt refers to any money that you owe to someone else (including yourself) in payment of some transaction. The transaction could be in the form of a bill payment, loan payment, or even a purchase. When this outstanding balance continues to exist, consumers are said to have accrued debt – and the more they accrue, the harder it becomes to pay back.
Personal debt can affect virtually every aspect of your life. It may prevent you from buying that new car, keeping up with mortgage payments, or purchasing that new home. It may prevent you from building up that retirement fund or paying for college education. And if it’s at a point where your debts may be affecting your credit score (which will determine your eligibility for loans and credit cards), then bankruptcy may be an option.
Personal debt, business debt, and credit card debt all fall under the category of unsecured debt. The only difference is that these types of debts do not have any collateral (such as a house) to secure them. This is why the three words “personal debt” are really just an umbrella phrase for all types of unsecured debt.
If you’re looking for personal debt relief, there are a number of options available. One option is to contact your creditors directly. Some creditors are happy to work with you to find a payment plan that you can afford. If you owe more than seven thousand five hundred dollars and you have not been making payments on time for six months or more, then most creditors won’t negotiate. You can still pay back the amount over a longer period of time – it’s just going to take longer.
A much better option is to use a debt collection agency. Debt collection agencies to collect on behalf of their clients and often will reach agreement with creditors on a reasonable payment plan. However, one disadvantage to using a debt collection agency is that you may lose any legal protections that you may have had through your bankruptcy. Most debt collectors will go after your wages and your personal assets first. So if you don’t want to have your wages garnished, you may want to consider using a debt collection agency.