Article Side

Online Article Directory!

Hello Guest! Login or Register to submit articles!

Secured Debt and Unsecured Debt

By William Hauselberg Subscribe to RSS | January 6th 2012 | Views:
loading
 
  



As you pay your bills each month, you may not realize that some of your debts are secured while others are unsecured, and the differences between the two are critical in prioritizing your payments.

Secured Debt

Secured debt is a debt that is “guaranteed”. In order to guarantee the debt, it is backed by some sort of asset or collateral. If you do not pay your debt, your lender will take the collateral from you as payment. One of the best examples of secured debt is a mortgage. A bank will loan you money to purchase a home. Once you have made the purchase, your home becomes the collateral, and if you are unable to make your payments, the bank can – and will – seize your home and sell it in order to recoup the money they lent you.

Interest rates on secured debt tend to be lower than rates on unsecured debt, as lenders know they will be able to recoup payment no matter what, making secured debt a much safer option for lenders. Even if you default on your payments, they will simply take the collateral as payment instead.

Unsecured Debt

Unsecured debts are not backed by any guarantee. Although you sign a contract agreeing to pay back the loan that is being extended to you, there is no collateral holding you to that payment, making unsecured debt much riskier for lenders. Because of the risk involved, unsecured debt often comes at much higher interest rates. Personal loans and credit cards are prime examples of unsecured debt. If you default on personal loan or credit card payments, your lenders cannot repossess any property as collateral payment. They can, however, take attempt to take legal action against you. And no matter what, missed payments will result in damage to your credit score.

There are instances in which a credit card debt may be secured. In cases of secured credit card, you make an initial payment and are given a card with that amount of money as your credit line. For instance, if you put up $1,000, you will be given a card with a $1,000 limit. You will be able to spend up to $1,000 on that credit card, with the money you put down as collateral securing that loan.

If you are struggling to pay your debts, it’s time to prioritize. Because missed payments on secured debts can mean repossession or property, it is wise to pay these debts first. For more information on how to manage all of your debts, you may wish to contact a credit counseling agency to help get your finances in order.

William Hauselberg - About Author:
The author has an immense knowledge on secured debt. Know more about unsecured debt related info in his website.

Share on Facebook Tweet It Stumbleupon this post This post is delicious !

Article Source:
http://www.articleside.com/finance-articles/secured-debt-and-unsecured-debt.htm

Related Finance Articles Subscribe to RSS

Making debt settlement easier with groups
Published by Rajkumar Kaushal on May 15th 2012 | Finance
Debt settlement forms and articles have become what a lot of people are making use of when it comes ...
 
How to make use of debt settlement rating
Published by Rajkumar Kaushal on April 27th 2012 | Finance
In the beginning of debt settlement history, debt Settlement rated was unheard of until now. You mi...
 
What is debt advice UK and just how can one get this service?
Published by Deby Suportie on February 15th 2012 | Finance
Debt advice UK has aided many people affected by their debts. Through the years, providers have been...
 
Settlement of debt in America
Published by Rajkumar Kaushal on June 23rd 2012 | Finance
Getting settlement in America when it comes to credit card is not very easy sometimes because of the...
 
Getting the most out of your unsecured business loans
Published by Mathias Scott on June 14th 2012 | Finance
An unsecured loan is one that you get without having to put forth a collateral. In this form of lend...
 
Outsourcing debt settlement is the best solution
Published by John Taylor on December 26th 2011 | Finance
If you are in the business of marketing debt resolution services, you should consider outsourcing de...
 
Eldridge Financial Blog: UK in recession again as recovery is ‘paralyzed’ by the European debt crisis, forecasted.
Published by Eldridge Blog on February 18th 2012 | Finance
Britain is once again suffering a recession and unemployment risks coming close into three million t...
 
What precisely does Credit card debt help signify and just how can it benefit me?
Published by Deby Suportie on April 2nd 2012 | Finance
Credit card debt help is a support offered by lending companies to help those who are struggling wit...
 
Stay away from the traps of the student debt
Published by Peter Paul on December 15th 2011 | Finance
The student debt can be avoided at all costs. Here are some tips to stay away from the traps of the ...
 
Caravan Loans - Helps You to be in debt Caravan Loans
Published by Mark Fulton on February 3rd 2012 | Finance
Caravan Loan is extremely well-liked these days, insist in increasing and is basically liked car fi...
 
Solving debt problems in the 21st century
Published by Deby Suportie on April 3rd 2012 | Finance
The number of people with debt problems continues to increase year after year. Even individuals who ...
 
Software collection centers in debt settlement
Published by Rajkumar Kaushal on May 17th 2012 | Finance
Most of us who have gone for reduction in debt settlement problem for debt settlement collector duri...
 
Counseling debtors during debt settlement
Published by Rajkumar Kaushal on May 19th 2012 | Finance
When you are about planning for Counseling in debt settlement and debt activities, it is important t...
 
Credit Counseling: Your first line of defense against crushing debt
Published by CVGiCanada on January 11th 2012 | Finance
Your Toronto credit counselor is someone you have to have a great deal of trust in. These profession...
 
Why hire a credit card debt management company?
Published by Yossi A on January 12th 2012 | Finance
As a matter of fact, it not only clears your already existing debt but also offer valuable technique...
 
Do you need assistance with financial debt that has been around for decades?
Published by Deby Suportie on February 16th 2012 | Finance
Debts can often be difficult to manage especially when it has been around for quite a while already....
 
Making debt settlement customized
Published by Rajkumar Kaushal on April 27th 2012 | Finance
Debt Settlement personal is important because they are options that would make your debt reduced dra...
 
The best debt consolidation advice
Published by Fresh Finance on January 19th 2012 | Finance
Many cases of multiple charges, including credit card charges, economical credit score items from lo...
 
Simply what does debt elimination signify and how can debt management programs help you become free of debt?
Published by Deby Suportie on April 4th 2012 | Finance
Debt elimination is a service given by debt management plans to provide assistance to those who are ...
 
Before you make proposal for debt settlement
Published by Rajkumar Kaushal on April 27th 2012 | Finance
How would the world look without making debt Settlement proposal? The answer is not far-fetched beca...