When you borrow money from a bank, lender, financial institution or utility provider, this is considered a debt. Debts will remain in your name until you pay them back. It’s worth bearing in mind that not all debt is ‘bad’ debt, and as long as you repay it on time and in full, it can be a useful way to access money when you need it.
There are a number of different types of debt, with different lengths of time required to pay the money back.
So, what is short-term debt?
Short-term debt is any amount that needs to be paid within a year. So any loan with a term of a year or less would be considered short-term debt.
Short-term debts include:
- Council tax
- Current account
- Utility bills
- Mobile phone contract
- Credit card
- Bank default agreement
- Budget account
- CommsSupply account
- Council arrears
- Hire purchase
- Home lending agreement
- Insurance agreement
- Mail order account
- Option account
- Rental agreement
- Unpresentable cheque
- Payday or short-term loan
- Property rental
- Basic bank account
- Bridging finance
- Social housing rental
- Local authority housing
What is long term debt?
Long-term debt is any debt that doesn’t need to be paid within the year. For example, a mortgage would be considered a long-term debt, as it can take up to 40 years to repay.
Long term debt include:
- Consolidated debt
- Fixed term agreement
- Uncategorised agreement
- Secured loan
- Unsecured loan
- Mortgage