• While debt is a frightening prospect, paying off your debt can improve your credit score. An improved credit score can mean that you can take out larger amounts of credit for a car or house loan later in life. You may encounter many different forms of debt as you become more financially independent.
  
  

Secured and Unsecured

• There are two categorizations which all debt falls under and that is secured versus unsecured debt. Secured debt refers to debt like a loan that is given based on some sort of collateral. If you take out a loan based on the fact that you own a car or a house the loan is secured. This means that if you default on the loan, the institution who lent you money may be entitled to part of your collateral. Unsecured debts include credit cards and unsecured loans from a bank. If either type of debt goes unpaid, it can lower your credit score and make it more difficult for you to get future lines of credit.
  
  

Credit Card

• Credit card debt is an unsecured debt that is used for everyday purchases. This debt can be easily controlled if payments are made at the end of every month. If the payments are not made, the card will be balance will be charged a certain amount of interest based on the original cardholder deal. If you cannot pay down the entire balance, you can pay down a minimum payment decided upon by the lending institution. A large amount of interest can be accrued if only the minimum payments are made each month. If you do not make a minimum payment, the interest rate on the credit card will often go up and there will be a penalty charged.
  
  

Investment

• Buying a home or car or taking out a loan for education purposes are often referred to as investment (or good) debt. While this type of debt may have a positive aim, the importance of paying monthly payments on time is just as important. If you have a high amount of credit card and unsecured debts, it may be difficult for you to get a bank to lend you money for an investment debt. This is because taking out a loan requires a high credit score and a strong debt to income ratio.
  
  

Personal Loans

• Loans can be taken out from a bank for a variety of reasons. Some of these reasons include starting a business, consolidating debt or simply trying to supplement living expenses. When the economy is strong, it is more likely for banks to give out loans and the opposite is true when the economy is struggling. For those suffering from credit card and other unsecured debt, debt consolidation loans can help to combine all of your debts into a longer term loan that simplifies many payments into one.
  
  

Tax Debt

• If you have not paid the Internal Revenue Service (IRS) in full for your taxes, you will be charged an interest rate on your tax debts. This interest rate is lower if you pay back some of your taxes than if you neglect to pay them at all. The IRS does offer installment plans that allow you to make payments like a personal loan.