What is personal debt?  It is the debt you take on as an individual.  It may have bad connotations, but debt is not always bad.  There are many instances when loans and credit are completely necessary.  Personal debt is only bad once it gets out of hand.

What Kind of Personal Debt Is there?

There are so many different ways to get personal debt.  Basically, you are taking out a loan of some sorts.  The most common loans you can probably think of are student loans, private loans, mortgage loans, small business loans, etc.  These can be hard to get if you don't have credit, have bad credit, or have low income and assets.

There are also consumer type loans such as credit cards and other financing.  Credit card debts are used by many people but are easy to fall into trouble with because they are so easy to charge to and the interest rates are so high.  Auto loans can also be considered consumer debt or other financing such as for electronics, furniture, or other large purchases.

As I mentioned, all of this kind of debt isn't necessarily bad in and of itself.  It is how you deal with it that can turn sour.  If you don't pay back your loans, you will get bad credit and will get into trouble with a collection agency and potentially the law.  If you only pay the minimums, especially on credit cards and other high interest loans, you could lose a lot of money in interest.  Don't pay the minimums and you'll owe lots of fees.

Secured debt is some type of debt, often personal debt, that is backed by collateral.  For example, a mortgage is secured debt because it is backed by the house you bought it for.  If you stop paying the mortgage, they can take your house away.

Unsecured debt is not backed by collateral.  Credit cards are a perfect example of unsecured debt.  You get a credit card and charge to it, but there is nothing they can take away if you don't pay them back.  This is part of why the interest rates are so much higher.

Should you have one of these types of debt over the other?  Not necessarily.  You may find that you use both at some point or another.  You just need to make sure you manage it all well.

If you can manage your personal debt and keep it from getting out of control, you can do a lot for yourself.  You can open up doors with the opportunity to borrow money such as for a business, and you can avoid paying too much money in interest.

First of all, always pay off the full balance on your credit cards each and every month.  If you can't manage to do that, you can't responsibly use credit cards and you need to get rid of them.  Don't use credit cards unless you can be completely and 100% responsible with them enough to pay off the full balance.

Don't take out more loans than you can pay.  Millions of people lose their homes because they take out huge mortgages for homes they can't afford.  Don't do it.  You'll only cause a lot of pain and problems for yourself.

Budget your money.  By following a good budget, you can make sure you afford what you need and only buy what you can afford.  This includes only taking out loans that you know you can pay back.