What is Secured vs Unsecured Debt?
The average consumer typically has a combination of both unsecured and secured debt. Freedom Debt Relief’s Debt Reduction Program may only be used to settle unsecured debt. Unsecured debt is a loan or debt that is not secured by any personal property, real estate, or other tangible assets. If a borrower defaults on an unsecured loan or debt, the lender’s only recourse is to pursue legal action against the borrower. Common types of unsecured debt include credit cards, department store charge cards, phone bills, utility bills, medical bills, and unsecured personal loans. Secured debt is a loan or debt against which a borrower has pledged an asset (such as a car, house or other personal property or real estate), as a form of collateral to the lender as security against default. If the borrower defaults on the loan or debt, the lender has the right to take ownership of the asset and may sell it to satisfy the debt. If the sale of any such seized asset fails to fully settle the debt, the bo
Secured debt is defined as debt backed or secured by a mortgage or pledge of collateral or other lien in order to reduce the risk associated with lending and which the creditor has the right to pursue upon default. Examples of secured debt would be home mortgages, auto loans, and student loans. Unsecured debt is defined as debt not secured by collateral in which the creditor holds no special assurance of payment. If the borrower defaults, the creditor has no assets to back up the loan. Only unsecured debt can be involved in the debt settlement process.
