What is the difference between secured and unsecured debt?

In Oregon, the difference between secured and unsecured debt is important for businesses to understand. Secured debt is a type of loan in which the borrower pledges some sort of collateral as security. This provides the lender with some assurance that the loan can be recovered even if the borrower defaults. Common types of assets used as collateral are real estate and vehicles. On the other hand, unsecured debt does not require collateral. Instead, it is based solely on the creditworthiness of the borrower. Credit cards and consumer loans are typically unsecured debt. Since lenders have no assurance that the loan will be repaid, they usually charge higher interest rates for unsecured debt than they do for secured debt. In both cases, if the borrower fails to repay the debt, the lender can initiate a legal proceeding to attempt to recover the loan. For secured debt, the lender can typically take legal ownership of the collateral. With unsecured debt, however, the lender must rely on other strategies such as wage garnishment or judgment liens in order to recoup the money.

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What is the difference between secured and unsecured debt?

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