CA$H Maine

Creating Assets, Savings & Hope

Types of Debt

There are two major types of debt, installment and revolving. Installment loans are specific amounts of money that you borrow that will be paid back in set monthly payments, plus interest. An example of this might be a car loan, home loan, or college loan. With revolving debt you can continue to borrow each month, up to a limit, and also make payments each month.

The most common type of revolving debt is a credit card. Credit card companies offer you a specific dollar limit and a certain interest rate. For example $5,000 at a 24.99% interest rate. You can pay off your balance each month and not accrue any additional interest or you can pay the minimum payment and accrue interest on the remainder of what you owe.

 

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