Debt Collectors in Port Elizabeth talk about what constitutes a debt

Able Tracers are Debt Collectors in Port Elizabeth. We have specialised in debt collection and apply professional and ethical strategies throughout the collection process.

We offer expert collection of unpaid debt of both high and low value from private individuals to commercial entities.

In this article we take a closer look at what exactly constitutes a debt, the different types of consumer debt as well as good vs bad debt.

What is debt?

Debt is a deferred payment.

It is typically a total amount of money or payment owed for services which have been borrowed or used by one party (debtor) from another (creditor).

The amount of money borrowed or the amount of money owed for services, usually comes with an arrangement which allows the debtor the opportunity to pay back the amount within a certain time-frame, usually with interest.

Debt can be on various credit terms. E.g. payment on delivery, payment on presentation of invoice, 30 days nett or 30 days from invoice. 

In cases of rental - it is in advance. When tenants are already living in the rented home and fail to pay their rental on the 1st of the month, their debt is then incurred from the 2nd day of that particular month.

Types of Consumer debt

  • Credit card debt
  • Personal loans
  • Medical debt
  • Cell phone contracts
  • Car loans
  • Student loans
  • Payday loans
  • Utility bills
  • Business loan

Types of Good Debt

Good debt is generally considered an investment and can help you generate an income or add to your value as a potential employee.

Here are some examples of good debt:

  • Business loan - a small business loan can help you start up your business which has the potential to grow, thereby generating an income.
  • Student loan – by furthering your studies you increase your value as a potential employee. You are investing in your own future by investing in your education.
  • Home loan – buying a home is a largely beneficial investment opportunity. After you have paid off your home you can sell it for profit or you can allow tenants to rent it out which provides you with a passive income. Taking out a home loan can help you achieve this.

Types of Bad Debt

Even though some good debt can have a negative side to it, there are certain types of debt that should be avoided at all costs.

Here are some examples of bad debt:

  • Clothing or other store accounts – often coming with exorbitant interest rates, clothing or other store accounts encourage you to spend money you don’t have on things you don’t need.
  • Vehicles - new cars are not only expensive but they lose their value at an exponential rate. Although vehicles are often a necessity, it’s not necessary to buy the fanciest car available. Monthly payments and maintenance costs on such vehicles are extremely high and hard to keep up with.
  • Credit cards – easily the worst form of bad debt. Credit card payment schedules are set up in such a way that they maximise costs for the consumer. Interest rates are also significantly higher than that of consumer loans.

Some debts are necessary. However, before entering into an agreement with the relevant creditor, it’s important to understand the terms and conditions of the debt agreement.

Furthermore, bad forms of debt should be avoided in order to prevent yourself from becoming overindebted.

Able Tracer & Debt Collectors – Debt Collection Port Elizabeth

With 38 years of experience, our expert debt collectors in Port Elizabeth can assist you with efficient and successful debt collection.  Our firm was established in 1965.

For more information about our debt collection services in Port Elizabeth, please contact us.

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