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oliverm

Secured and unsecured credit

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1 hour ago, oliverm said:
 

What is the main difference between secured and unsecured credit?

Simple.

 

Secured credit is when you put up something of value in exchange for the loan.  The biggest examples are mortgages and auto loans.  In these cases, the home or auto is the security for the loan.  If you default on the loan, the bank can foreclose on your home or repossess your car.

 

Unsecured loans are loans for which there is nothing of value backing up the loan.  The biggest example is credit card debt.  If you default on your credit card, there is nothing of value for them to seize to recover the cost of the loan.  

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One caveat. A creditor for an unsecured debt can sue, get a judgment and then levy, lien and garnish your assets. The difference is a secured creditor has a pre-arranged agreement where you've already agreed they can take whatever collateral you've put up to secure the debt. 

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