What is a secured debt?

A secured debt is a type of debt that is guaranteed by an asset such as a house, car, or other property. This means that if the borrower fails to make their payments to the creditor, the creditor can take ownership of the property that secured the debt as payment. In Texas, this process is known as foreclosure. The asset that secures the debt is known as the collateral. When a borrower takes out a secured debt, they are agreeing to let the creditor take ownership of the collateral if they fail to make their payments. This provides the creditor with a greater sense of security that their debt will be repaid. For example, if a person takes out an auto loan to purchase a car, they are agreeing to let the lender take ownership of the car if they fail to make the loan payments. The lender can repossess the car as payment for the loan, regardless of the current market value of the car. Secured debt can also help borrowers who have bad credit histories qualify for loans with lower interest rates. By providing collateral, the borrower is providing the lender with more security that the debt will be repaid. In Texas, secured debt is governed by the Texas Business and Commercial Code, which outlines the rights and responsibilities of both the creditors and borrowers in secured debt transactions. This code protects the rights of both parties involved in the agreement while also ensuring that the debt is repaid.

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What is a secured debt?

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