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Understanding the Differences Between Secured and Unsecured Debt

Advice for Debt-Help® in Edmonton from Your Licensed Insolvency Trustee

Do you know what kind of debt you carry? Do the terms “secured” or “unsecured” make you scratch your head? Understanding what types of debt are in your overall financial portfolio can help you make better decisions in the future. Having too much of one over the other can hamper your net worth. Having too much debt in either category can also hinder your life, especially when you are struggling to pay your creditors. If you are in over your head, ask for debt-help® from our Licensed Insolvency Trustee in the Edmonton and Northern Alberta region.

Know the Difference Between Secured and Unsecured Debt

Here are some common types of unsecured debts:

  • Credit cards
  • Personal loans
  • Business loans (unsecured lines of credit)
  • Peer to Peer Loans
  • Private student loans
  • Medical liability
  • Apartment Leases
  • Cellphone and utility bills
  • Auto repossession overage balances
  • Short selling your real estate

Unsecured Debt

Unsecured debt is not tied to any kind of assets, such as a house or car. Credit cards are unsecured debt and as such the creditor does not have any claim to your property should you fall behind in payments. The creditors cannot foreclose on your real estate unless they sue, get judgement and start enforcement proceedings. However, falling behind on your credit card payments can wreak havoc on your credit report. These loan types are not tax deductible.

Secured Debt

Secured debts are backed by some sort of asset. So, while the lender will look at your credit report to determine your likelihood of repaying the debt, they will require that an asset be pledged in case you default on the loan. Consider the last time you bought a car using a bank loan. The lender provided the funds to pay the seller but required that a lien be placed on the vehicle until the loan was paid off. If you fail to make all the payments on your car loan, the lender can repossess your car and sell it to recoup their loan. Another type of secured loan is a mortgage. In this loan, you pledge your real estate in exchange for loan funds.

Overwhelmed by Debt? Contact A Licensed Insolvency Trustee from A.C. Waring & Associates Inc

No matter what type of debt you carry, there are times when it can become more than you can bear. A trustee and credit counselling professional can provide advice, guidance, and solutions for debtors dealing with issues such as too much debt. We take pride in our ability to help you successfully work your way through and out of personal or business related financial problems.

For advice on dealing with debt problems in Edmonton and the surrounding region, schedule a free initial consultation with the professionals at AC Waring & Associates Inc.

Call our office toll-free at 1-800-463-3328 or 780-424-9944 with your questions and concerns regarding debt management and debt solutions.