What is the difference between secured debt and unsecured debt?
An unsecured debt relies only upon your promise to repay (and the promise of co-borrowers and/or co-signers as well) the debt. The most common types of unsecured debts are credit cards, department-store cards, medical bills, and personal (signature) loans. A secured debt relies upon collateral or security for a secondary source of repayment if you fail to repay. The most common forms of secured loans are home loans (mortgage and equity line-of-credit), car loans and RV loans. Once default takes place, the creditor’s recourse is usually to foreclose on a home or repossess a vehicle. A quasi kind of “secured” loan is a student loan. It’s really a “guaranteed” loan, but the guarantor is usually the State or Federal Government. Because the lender can get guaranteed repayment, we cannot negotiate student loans. • How long will it take to settle • Service investment • Creditor Interaction • How is my credit affected • Settlement vs.
Secured debt is when there is a security interest in real property or assets that are used as a guarantee that you will repay a loan as laid out in your loan agreement. If you do not meet the terms of the loan agreement, your secured creditors will have rights to the secured assets as a means to guarantee they get paid. The best examples of this in everyday transactions are home mortgages and car loans/leases.
