What is the difference between unsecured debt and secured debt?
Unsecured debt generally arises out of a contract entered into with a creditor that enables you to obtain goods and services on credit in exchange for your promise to repay the creditor. Credit cards, medical loans, and personal loans are the most common types of unsecured debts. If you are delinquent with this type of debt the only recourse the lender has is legal action. A secured debt is a loan where the creditor retains a security interest in your property such as a house or an automobile. If you fall behind on payments with this type of debt the lender has the ability to repossess the property in order to mitigate their damages. If your property is repossessed and sold you remain liable for any deficiency balance that remains after the sale. Certain exceptions apply depending on the nature of the security interest. The laws regarding home mortgages vary from state to state and the lenders’ rights usually depend on the terms of the mortgage and whether any other lenders have an int
A secured debt is a debt in which the creditor maintains a security interest in an item or piece of personal property such as home mortgage, vehicle loan and just about all finance company loans are secured debts. If you fall behind on payments, the lender can repossess the property that originally secured the debt. The creditor can institute a foreclosure or repossession to take the property identified by the lien, called the collateral, to satisfy the debt if you default. An added drawback to secured debt is the fact that you may remain accountable for the remaining balance owed on the debt after your property gets repossessed then sold. Unsecured debt is when is not tied to any item of property. A creditor does not have the right to grab property to satisfy the debt if you default. If you fall behind on an unsecured debt, lenders can take legal action against you, but more commonly will try to work out a reasonable debt settlement. Unsecured debt is any loan or debt that has no tang
The creditor of an unsecured debt relies only upon your promise to repay and that of any co-borrowers and/or co-signers you might have. The most common types of unsecured debts are credit cards, department-store cards, medical bills, and personal (signature) loans. The creditor of 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, such as first mortgages, 2nd notes and equity lines-of-credit, car loans, boats, and RVs. Once default takes place, the creditor’s recourse is usually to foreclose on a home, or repossess a vehicle. A kind of quasi “secured” loan is a student loan. It is really a “guaranteed” loan, but the guarantor is usually the State or Federal Government. Because the lenders can get guaranteed repayment, they will not negotiate the settlement of student loans.
Unsecured debt is any loan or debt that has no tangible assets or property attached to it. The most common types of unsecured debt are credit cards, department store cards, medical bills, utility bills, and personal loans. Should you fail to make timely payments, the lenders only recourse is to pursue legal action. Secured debt is debt for which the creditor has collateral in the form of a security interest in personal and/or real property. Should you fail to make timely payments on secured debt, the creditor is entitled to repossess the property and sell it. Please keep in mind that you may still be liable for any deficient balance remaining after the sale of the property. When dealing with secured debt, it is important to obtain advice from a licensed attorney in order to protect your interests.
A. Unsecured debt generally arises out of a contract entered into with a creditor that enables you to obtain goods and services on credit in exchange for your promise to repay the creditor. Credit card debt, medical loans, and personal loans are the most common types of unsecured debts. If you are delinquent with this type of debt the only recourse the lender has is legal action. A secured debt is a loan where the creditor retains a security interest in your property such as a house or an automobile. If you fall behind on payments with this type of debt the lender has the ability to repossess the property in order to mitigate their damages. If your property is repossessed and sold you remain liable for any deficiency balance that remains after the sale. Certain exceptions apply depending on the nature of the security interest. The laws regarding home mortgages vary from state to state and the lenders’ rights usually depend on the terms of the mortgage and whether any other lenders have
