What is the difference between a secured debt and a non-secured debt?
A secured debt is one where a person, in exchange for receiving money to purchase something, says to the creditor: “If I do not pay this amount, you have a right to have this item back.” Basically, the item that was purchased is the security, meaning the creditor has some sense of security in knowing that he will either get money for the item or he will actually get the item back. This is what is referred to as a Purchase Money Security Interest (PMSI). When purchases of major ticket items are bought with credit cards, especially department store cards, a purchase money security interest is ordinarily given to the seller. A non-secured debt is one where the creditor only has the option to recover the money and not the actual item sold. Another example of a secured debt is an automobile loan where the seller retains the title to the automobile and will transfer title when the total amount of the purchase price has been paid. An example of a non-secured debt is a personal loan which is n
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