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by Spixxy on July 16th, 2004

Spixxy

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What are secured debts, and what's the difference between secured and unsecured debts?

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  • by Andy Is Wicked Married to Penal Colony on July 18th, 2004

    Andy Is Wicked Married to Penal Colony

    Secured debts are debts that are secured with collateral of some type(car loans and mortgages for example). Collateral can be cash or the item you have a loan for itself. In other words, it can be forclosed on or repossesed. Plus it can often be resold and the creditor is able to recoup all or most losses. Also with secured debts you lose the ability to have the debt discharged in bankruptcy in most cases.

    These days there are even secured credit cards for folks with poor credit. These are a pay before you spend cards. The creditor is assured of complete payment and the user has the convenience of a credit card. What you pay in, is typically your limit.

    Unsecured debt is typically a credit card/account with revolving credit. The card was not secured for the sole purpose of buying property that the creditor can liquidate later if you default on the payments/loan. They have no assurance, other than your agreement to repay them on their terms, that they will get paid. They can't come take your car or house to make you pay your credit card bill, they must attempt to collect first. These types of loans can typically be discharged in bankruptcy.

    http://www.bankrate.com has lots of information on secured and unsecured loans.

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