What is the difference between secured and unsecured credit?
Secured credit is backed by collateral. You pledge an asset to the lender and if you fail to repay, the lender may sell your collateral. Because you have pledged collateral, the lender has less risk, and therefore secured credit is often the easiest credit to obtain. Mortgage or auto loans are the most common examples of secured credit. With unsecured credit the lender extends you credit based upon your ability and willingness to pay. This is evidenced by your credit history. You do not pledge collateral and because no collateral is pledged, the lender has a greater risk of loss if you do not pay. Therefore, the lender must have more confidence in your ability and willingness to pay the debt. Unsecured credit is chiefly granted upon your credit history and current financial conditions. If you default, the lender must go to court and sue you. Therefore, only after the creditors obtain a judgment can it seize your assets to recover its money. I can’t get a regular bank credit card becaus
