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Is Your Debt Secured or Unsecured?

Posted on in Bankruptcy Attorney

Most people do not have an idea of the type of debt that they have, and some debt can be considered good, depending on what kind it is. It is important to know the difference between the different types of debt, specifically secured and unsecured debt. Secured debt and unsecured debt may even affect your credit score.

Unsecured debt, according to advantageccs.org, “is debt that is not guaranteed or backed by any collateral.” The meaning behind this is that if you do not pay back your loans for these types of debts, the company cannot take any of your assets to recover the costs of the unpaid payments. Credit cards are an example of unsecured debt, which is why credit cards usually have a higher interest rate. Credit card companies usually turn to collection agency if there is unpaid debt.

“Secured debt is debt that is backed by some type of collateral such as assets or revenue from the borrower.” Secured debt is usually things such as a mortgage or vehicle loans. If the loans are not paid back the lender has the ability to seize back the assets, such as a house or vehicle. Because lenders have the ability to retake assets if there are unpaid loans there are usually lower interest rates on these loans.

A portion of your credit score depends on what type of debts you have, and whether or not they are considered to be healthy debt. The credit score takes into account the revolving credit and installment rates that you have. Revolving credit is usually loans that come from unsecured debt and installment loans come from secured debt.

If you have any questions on any debt that you have or if you are looking to file for bankruptcy be sure to contact a lawyer. Call an experienced Cook County Bankruptcy Attorney today.

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