All debt can be classified in one of two different ways. Debt is either considered to be secured, or unsecured. In order to understand the impact that each type of debt can have we need to understand what constitutes both secured and unsecured debt.
Secured Debt:
Secured debt is any debt that requires collateral in order to obtain a loan. Examples of secured debt would include:
- A home mortgage
- Home equity line of credit
- Car loan
- Credit card with a secure line of credit
A lender will always see a secure loan as a lower risk loan. Due to the fact that there is collateral behind what is being loaned, the lender generally will feel more confident in approving the loan. If a debtor fails to make payments the lender holds the right to reposes the item that was purchased with the loan. For example, the lender may reposes a vehicle, or foreclose on a home if payments are missed.
Unsecured:
Unsecured debt is just the opposite of secured debt, and involves receiving a loan or line of credit with no collateral. Examples include:
- Credit cards
- Department store cards
- Signature loans
- Telephone bills
- Health club fees
- Magazine club fees
Money that is loaned without collateral is usually loaned on a much smaller scale than secured loans. The lender is at a higher risk because if the debtor defaults on payments there is no way to for the creditor to take back any item and regain the money they loaned.
I Can’t Handle My Debt:
Most people get in over their heads with unsecured loans because they don’t keep a close eye on them. They stretch themselves too thin and soon are unable to make payments. When they find themselves struggling to stay afloat they may want to consider bankruptcy. There are different types of bankruptcy to match the type of debt that you have. Bankruptcy is a way to start fresh in life and have your debt completely removed!
If you are struggling with debt you need to contact Benjamin Skinner, experienced Arizona bankruptcy attorney today to discuss what your options are, and see how bankruptcy can help you! (480) 648-8975