West Palm Beach Bankruptcy Attorney

Secured vs. Unsecured Debt

When opening a line of credit, applying for financing, or receiving any other type of loan, you will either receive a secure debt loan or an unsecured debt loan. These types of debts are very different and the interest rates with both can be significantly different. When acquiring any kind of debt, it is important to be fully aware of what you are getting yourself into.

Secured Debt

When you obtain a secured debt, the creditor or lender has been guaranteed collateral in case the loan defaults. You can use many different forms of collateral, including your home, car, boat, land, or even your personal business. The collateral that you post can serve as a safety net, and it allows the lender to be more flexible with the interest rate you receive. If in the event that you do default on a secure debt loan, the creditor will repossess whatever collateral you have posted. A secured loan is safer than an unsecured loan, because the bank is more comfortable offering a lower interest rate, and the borrower has more incentive to make payments.

Unsecured Debt

An unsecured debt is not fixed to any piece of collateral, and therefore usually comes with a higher interest rate. Some examples of unsecured debts include credit cards and government assistance on school loans. When applying for either of these, the lender does not secure any form of collateral, so it is more difficult for the bank or credit card company to get a payment from the borrower. Many forms of unsecured debt can be dismissed altogether with certain forms of bankruptcy.

Contact Us

If you have an overwhelming amount of secured or unsecured debt, bankruptcy may be an option worth considering. Contact the West Palm Beach bankruptcy attorneys at Eric N. Klein & Associates, P.A., at 561-353-2600.