What is the difference between secured and unsecured debt?

Secured debt is a type of loan that can be backed by collateral. Collateral is something of value that can be taken if the loan is not paid back. This could include a car, home, or other item that can be seized if the loan is not repaid. Unsecured debt is not backed by any collateral and is not tied to a specific asset. This means that if the loan is not paid back, the lender may not be able to take a specific asset they can use to repay the debt. Credit card debt and most student loans are examples of unsecured debt. Secured debt is usually used to purchase bigger items like cars, homes, or other things that require a larger loan. Unsecured debt is used more often for smaller purchases or things that do not require a large loan. Unsecured debt also usually has higher interest rates than secured debt. In Texas, if you have secured debt, and you are unable to repay the loan, the lender may be able to pursue legal action including taking possession of the asset and selling it in an effort to recoup the amount due. With unsecured debt, the lender may try to collect it through legal means, but they may not have the same amount of power as they do with secured debt.

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What is the difference between secured and unsecured debt?

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