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credit grants credit or a loan to a client that must be repaid in pay- ments (installments) over a specific time period. One common type of installment credit frees up an equal amount of money as payments are made, which can be borrowed again. An example of this is a revolving charge card at a department store. Other common installment loans are automobile, education, and personal loans. A late fee is charged if you fail to make timely payments and a negative entry is made on your credit report.
In contrast, non-installment credit is repaid in one payment by a speci- fied date. Any bill you receive that says “payment in full due upon receipt of this bill” is non-installment credit.
Consequences of Ignoring Debt
In the previous section, we discussed some of the differences between secured and unsecured debt. It should be no surprise to you that if you fail to make your payments on secured debts, such as car loans and mortgage loans, the bank can repossess your automobile and foreclose on your home.
“I more than appreciate all you’ve meant to us this past year. It’s been fun watching these balances go down. Never again will we have credit cards or charge accounts to wreck our lives. Thanks for keeping us out of trouble.”
— N.R.B., Evanston, Wyoming
However, some people believe that because credit card debt is unse- cured debt, they may be able to walk away from having to make those payments. Many people simply ignore their debts when they experi- ence financial difficulty. Others fear that by contacting their creditors, they will quickly bring trouble upon themselves for not meeting their financial responsibilities.
Secured and Unsecured Debt
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