Secured debt is a debt form that is usually backed by an asset or collateral. These debts are usually of larger amounts and since they have a lien attached to them, they become important during the bankruptcy claims. A secure debt can broadly be classified into two types. Real property secured debt and personal property secured debt. Any debt that is secured by house, land, or any other real property by nature falls under the real property secured debt, and any debt that is secured under personal property like a car, motorbike, electrical appliance, etc., come under personal property secured debt.
Types of debt and secured credit cards
The key difference between a secured debt and unsecured debt is the ability to access the asset without any legal procedure in case the aforesaid loan agreement is not adhered to. Often credit cards are considered unsecured debt but there might be secured credit cards, that tag one of your assets in case you fall behind your payments. The concept of a secured credit card has been set up for people with low credit scores who otherwise will not be able to access a credit card. It is also a unique tool to build or rectify your credit score. Log on to https://www.recoverylawgroup.com/bankruptcy/ and know more about your credit score and things affecting them.
Unsecured debt vs secured debt
Unsecured debts can include credit card loans, personal loans, student loans, medical expenses, etc. These debts are usually of an emergency nature and are for short tenures generally. The amount of debt that can be availed is also limited in most circumstances. There are many advantages of getting a secured debt. Secured debt firstly is easier to obtain, has fewer formalities, fewer background checks, and an easier loan process. Secondly, the terms of the secured debt are more likely to be borrower-friendly as there is less risk for the lender. Hence, interest rates, longer tenure, bigger credit, etc., can all be accommodated with the secured debt.
People who do not have sufficient credit scores can also avail credit by mortgaging their assets for credit. Finally, people using secured debt can usually be much more financially responsible as they are not exposed to high penalties, charges, or interest rates for non-payment of dues. During bankruptcy, however, unsecured debts can be discharged fully, and secured debt might continue to be a burden depending on the chapter used for filing the bankruptcy. Know more about bankruptcy terms in detail and how they impact you by dialing 888-297-6203. Also, avail special discounts and packages if you are Los Angeles and Dallas, TX residents.