Debts come in many shapes and sizes and people accrue them for a multitude of reasons. While the actual items and purchases that lead to debt vary greatly, there are two main types that are important: secured and unsecured debt. What is the difference between these two kinds of debt and what do you mean for you?
Secured debts are those that are backed behind a physical item or asset that gives collateral for the debt. In other words, secured debt is one that was taken for the sole purchase of that item. Secured debts are important to keep in mind because if the person who took out the loan is unable to make payments on it, the item in question would be taken, or repossessed. The two most common examples of this are mortgages and auto loans, both of which are secured debts. If the person fails to make payments on them, their house or car respectively will be taken back as “payment” for the debt.
On the converse side of that, an unsecured debt is one that does not have a single tangible purchase behind it. Credit card debt, for example, falls under this category since it would be nearly impossible to try to collect back what was bought on a credit card if one is unable to make payments.
Due to this fact, if one is ever placed in a position to only pay back some debt and not others, you should always make payments on secured debt first, as there are more options for how to manage unsecured debt than losing your home or car. If you do ever find yourself in a situation where debt is becoming overwhelming, please call 855-780-1164 and we at Cain and Daniels would be happy to help you get and stay out of debt. We will work for and with you to help you determine the best course of action for you and get you back on the road to financial success today.