What is the difference between secured and unsecured debt?

In California, secured debt is a type of debt in which the lender has a claim on specific assets (known as collateral) if the borrower fails to make payments on the loan. For example, if someone takes out a secured loan to purchase a house, the lender has the right to take ownership of the house if the borrower defaults on payments. On the other hand, unsecured debt is a type of debt that does not require collateral and is considered to be more risky for the lender. If the borrower does not make payments, the lender cannot physically take the assets back. Credit cards are the most common example of unsecured debt. Secured debt is generally considered less risky than unsecured debt because the lender has a claim on specific assets if the borrower fails to make payments. This provides more security for the lender and, in some cases, a lower interest rate for the borrower. Unsecured debt is generally more risky for the lender, as they can’t physically take the assets if payments are not made. However, the interest rate may be lower for borrowers because of the risk taken on by the lender.

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What is the difference between secured and unsecured debt?

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