Finance

Oct 4 2016

The Difference Between Secured Debts and Unsecured Debts #interest #calculator #loan


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The Difference Between Secured and Unsecured Debts

By LaToya Irby. Credit/Debt Management Expert

Welcome to About.com s Credit/Debt Management site, led by your guide, LaToya Irby. LaToya has been the credit and debt management guide since 2007. Read more

When it comes to debt, there are two major types: secured debt and unsecured debt. Knowing the difference is important for borrowing money and for prioritizing your debts during payoff.

Secured Debts

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If the selling price for the asset doesn t completely cover the debt, the lender may pursue you for the difference.

A mortgage and auto loan are both examples of secured debt. Your mortgage loan is secured by your home. Similarly, your auto loan is secured by your vehicle. If you become delinquent on these loan payments, the lender can foreclose or repossess the property.

Unsecured Debts

With unsecured debts. lenders don t have rights to any collateral for the debt. If you fall behind on your payments, they don t have the right to take any of your assets.

However, the lender may take other actions to get you to pay. For example, they will hire a debt collector to coax you to pay the debt. If that doesn t work, the lender may sue you and ask the court to garnish your wages. take an asset, or put a lien on another your assets until you ve paid your debt. They ll also report the delinquent status to the credit bureaus so it can be reflected on your credit report .

Credit card debt is the most widely-held unsecured debt. Other unsecured debts include student loans. payday loans. medical bills. and court-ordered child support.

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Prioritizing Secured and Unsecured Debts


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