Money Wellness

Types of debt

There are many forms of debt such as buy now pay later, mortgages, credit cards, energy arrears and benefit overpayments.

These debts can be categorised in a number of ways. 

woman thinking about money

Priority and non-priority debts

All debts can be described as either priority or non-priority.

Priority debts need to be dealt with first, as they have the most serious consequences if you don’t pay them e.g. you could have your energy supply cut off, lose your home or even go to prison. 

Find out more about priority and non-priority debts. 

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Secured and unsecured debt

Debts can also be split into secured and non-secured debts

Secured debts

Debts that are taken out against an asset, e.g. your car or home, are ‘secured’. If you can’t pay the debt, the creditor can take the asset. 

Unsecured debt

Unsecured debts, e.g. credit cards, aren’t taken out against any assets – so there’s nothing the creditor can try to take if you don’t pay.

Failing to repay an unsecured debt can still be serious. You might find it harder to borrow money because of damage to your credit score or the creditor might take legal action to recover the money you owe.    

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