What is a secured debt?

A secured debt is a type of debt that is backed by collateral. Collateral is something of value that can be used as a guarantee that the debt will be paid back. In Washington, secured debts are governed by state law. When a debt is secured, the creditor can use the collateral if the debtor defaults on the debt. The creditor may take the collateral, depending on the type of security agreement that was created when the debt was created. For example, if a creditor was lending a homeowner money for a mortgage, then the home itself would be used as the collateral and could be taken by the creditor if the homeowner defaults on the debt. This gives the creditor a sense of security because they know the debt will be paid back or they can take the collateral if not. In Washington, secured debt must be in writing and signed by both parties for it to be legally binding. The written agreement must also include a specific description of the collateral and how it can be taken if the debtor defaults on the debt. Before entering into a secured debt, both parties should understand the terms of the agreement and the consequences that come along with defaulting. This can help protect all parties involved and ensure the debt is paid back in full.

Related FAQs

What is debtor and creditor law?
What is the statute of limitations for filing a lawsuit?
What is a loan shark?
What is a creditor agreement?
What is a temporary restraining order?
What are the duties of a creditor?
What is an unsecured debt?
What is an unsecured creditor?
How does a creditor sue a debtor?
What are the consequences of not paying a debt?

What is a secured debt?

Related FAQs

Related Blog Posts