It’s human nature to want things to make our lives better. For this reason, people will always spend their money on a variety of goods and things. Those include basics, like buying a house, utilities, clothes, and food. They may also include extras, like that attractive new sports car that just looked too good in the showroom window to walk by without purchasing. Unfortunately, in some cases, expenditures exceed income, and mom and dad say that the Bank of the Parents is no longer providing loans. In those cases, debt management becomes a necessity. Therefore, it’s good to know the difference between secured and unsecured debts.
What are secured debts?
Secured debts are debts that are secured by being tied to an asset that is collateral for the debt. The risk of these debts is that the person to whom the money is owned can place a lien on the asset that is tied to the debt. If you fall behind on payments, they get to take the asset.
One type of secured debt is a mortgage loan, which is secured by your home. Additionally, another example is an auto loan, which is secured by your vehicle. If you fail to make payments in these items, the lender can take your home or your vehicle. That is why any secured loan should only be obtained in instances that you are completely confident that you will be able to make all future payments. Therefore, you will not be at risk of ever losing them.
What are unsecured debts?
Unsecured debts do not have an asset attached to them. If you fail to make payments, the lender cannot take any of your assets unless they sue you. If they do, the court may provide for them a way to obtain your assets or a part of your income. For this reason, it’s best to contact the lender and work things out which usually involves a payment plan.
Examples of unsecured debt include:
- student loan debts
- medical bills
- gym memberships
- credit cards
- a lease
- utility bills
- personal loans
Get In Touch With Us
If you live in Hartford, New Haven, or Wethersfield CT and want to learn more about secured and unsecured debts, contact us today. We’re here to help you.