What are the similarities and differences between a secured loan and an unsecured loan?
The similarities are that both types of debts can be collected
according to the respective laws governing the transactions.
Secured debts are those in which some form of collateral has been
used. When someone buys a house, the house is used as collateral
for the loan. Lenders have much more leeway when collecting on
defaulted mortgages, such as foreclosure/forced sale. In the
instance of credit card debt, which is unsecured lawsuits have to
be filed, won, judgments executed, and so forth. Secured debts
always have to be paid or the property has to be forfeited.
Unsecured debts, even when a judgment is issued are not always
Unsecured debt refers to any type of debt or general obligation
that is not collateral by a lien on specific assets of the borrower
in the case of a bankruptcy or liquidation or failure to meet the
terms for repayment.
Secured loan is a loan where you will be required to use your
property as security against the loan, so the lender is able to
balance the risk of lending to you.