Types of Debts

Bank loans

A bank loan is the most common form of loan capital for a business. A bank loan provides medium or long-term finance. The bank sets the fixed period over which the loan is provided (e.g. 3, 5 or 10 years), the rate of interest and the timing and amount of repayments.

Bank overdrafts

A bank overdraft is flexible borrowing facility on a bank current account which is repayable on demand.

Credit and store cards

A credit card allows you to borrow money from your bank to make your purchases, whether you’re buying a burger or a round-trip ticket to France. As long as you pay back the money you borrowed within the “grace period” of 25-30 days, you don’t have to pay extra interest.

Friends and family debt

Borrowing money from close friends or relatives are normally seen as personal debts like these are non-priority debts and you can deal with them in the same way as other non-priority debts such as credit cards, store cards, loans or overdrafts.

Energy debt

Also known as utilities these bills are from your local council or national service provider like EEC regarding electricity usage.

Hire-purchase or conditional sale debt

This means you can buy goods on all sorts of different credit agreements. With most credit, you own the goods straight away and only owe the money to the creditor. Hire-purchase or conditional sale agreements are different to ordinary loans from a bank or a finance company.

Magistrates’ court fines arrears

The magistrates’ court may order you to pay a fine, for example, for a driving offence, for not having a TV licence or for some other offence.

Maintenance arrears

This Child Support is paid to the parent the child lives with, and the amount payable can be agreed privately or calculated, collected and distributed a court agreement.

Medical debts

Medical debt refers to debt incurred by individuals due to health care costs and related expenses. Medical debt is different from other forms of debt, because it is usually incurred accidentally or faultlessly.

Mortgage arrears

Mortgage arrears or secured loan arrears it’s important to act quickly. Not dealing with mortgage debt could result in your home being repossessed. You need to contact your lender to tell them why you’ve missed payments and arrange to repay the arrears.

Mortgage shortfalls

Money you still owe to your mortgage or secured loan lender in this situation, is called a ‘mortgage shortfall’. Sometimes the debt includes the monthly installments and interest added to the debt while your home is being sold.

Payday loans

A loan that is a relatively small amount of money lent at a high rate of interest on the agreement that it will be repaid when the borrower receives their next wages.

Rent arrears

Rent arrears are ‘priority debts’, which means the consequences of not dealing with them are serious – there is a risk of eviction.

Secured loan arrears

A second mortgage or other secured loan lender has to follow certain procedures before applying to a court to repossess your home. These procedures include sending you a statement to let you know that you have fallen behind with the payments (a notice of sums in arrears) and a default notice.

Student loans

A student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses.

Vehicle arrears

Also known as car loans or car repayments is a loan that is secured either from a bank, financial institution or point of sale against the purchase of a motor vehicle like a motorbike, car, bakkie etc.

Water-rates arrears

Also known as utilities these bills are from your local council or national service provider.