Debt can easily get out of hand, which will often end with you in bankruptcy court. The main debt that used to lead the pack for bankruptcy filers was credit cards. It is very easy to run up a credit card debt without even realizing it until you are in trouble. However, credit cards no longer hold that distinction. There is a new type of debt that is having a negative impact on person finances.

According to CNBC, the largest debt category for individuals is personal loans. These are typically unsecured loans. You can often get smaller interest rates for a loan than for a credit card, which makes them particularly attractive for one-time expenses, such as buying new appliances or home repairs.

The downside to these loans is that they usually have higher monthly payments than credit cards because you have a shorter amount of time to pay them back. With a loan, there is a set length that you do not have with a credit card. The credit card company is happy as long as you pay at least the minimum balance. Your lender for a personal loan does not feel the same. You must make each month’s payment in full for the designated number of months.

While a personal loan may seem like a better idea than a credit card, you may run into trouble if you cannot afford the payment one month. Falling behind will likely trigger collection efforts that move more swiftly than credit card collections. This information is for education and is not legal advice.