What Is The Difference Between A Secured Debt And An Unsecured Debt?
There are two types of loans – secured and unsecured ones. If you have a secured loan then it means that your loan is secured against your property, for example, against your house. If you will fail to pay back then the lender is authorized to take away your property. And if your debt is unsecured then you don’t risk to lose anything. But there’s more risk for the lender and that’s why unsecured short term loans have higher interest rates than secured ones. When you have a secured loan then you have more time to pay it back and pay lower interest rate but if something goes wrong you may lose your property.
A secured debt is a debt secured by property, such that if you do not pay the debt the creditor can repossess the property. Examples of secured debts are a house, property taxes, car note and possibly furniture payments or electronics payments. An unsecured debt is a debt that is not secured by any property, such that if you do not pay the debt, the creditor does not have any property to repossess. Examples of unsecured debts are credit cards, signature loans, medical bills and some taxes.
