Secured and Unsecured Debts, What’s the Difference?

Secured debts and unsecured debts. What is the difference between these two types of debt, and what does it mean for you as a debtor?

With a secured debt, collateral is promised if the debtor can't make payments or defaults on the loan. Collateral is a piece of property, such as an automobile or a home. You will not be able to settle these debts, as the creditor will simply accept the promised property as the "settlement." In other words your property will be repossessed.

With unsecured debts, there is nothing attached to the loan promised as repayment. Unsecured loans are typically given to people with good credit, because they have a good credit history. These are the type of debts that a creditor is willing to settle or negotiate. Unsecured debts include medical bills, credit cards, and personal loans.