If you are like the average American family, there is a good chance that you have both secured and unsecured debts. While you may not have heard these terms before, they are vital to your financial future. Resolvly can help you to understand and resolve your outstanding unsecured debts. Secured and unsecured debts both have their own benefits, but taking on too much can be risky. With that in mind, let’s take a closer look at both types of debt that you may encounter.
Secured debt is backed by collateral, i.e., financial assets that you own. Lenders, such as banks that issue secured loans, require borrowers to put something of value on the line, which incentivizes on-time payments.
Some of the most common types of secured loans are used for automotive purchases. When you finance a new car, the lender will use your vehicle as collateral. Once you finish paying for the loan, the car is all yours.
However, if you stop making payments, the lender will repossess your car. They will then resell the vehicle to pay off your debt. Mortgages are also considered to be a form of secured debt. As with vehicles, the lender considers your home to be collateral, and your ownership of the home is contingent upon paying off the loan.
Lenders typically offer better interest rates and higher dollar amounts for secured debt. This is due to the ability to collect collateral if you default on your loan. Having your property on the line may seem like a drawback, but it is often the only way to obtain the funds necessary to purchase a home or a car.
While unsecured debt does not put your property on the line, it can be very damaging to your financial future if you mismanage it. Unsecured debt is essentially any loan that is not guaranteed or protected by collateral.
Credit cards are the most widely used form of unsecured debt used in the United States. Nearly half of Americans have outstanding credit card debts. While having open lines of credit can generally be good for your credit score, having a high utilization ratio has an adverse effect.
Another type of unsecured debt that is increasingly prevalent comes in the form of student loans. High student loan payments can be crippling, preventing you from having the financial flexibility you need to buy a home or vehicle. The following categories represent forms of unsecured debt:
- Medical bills
- Credit cards
- Payday loans
- Personal loans
- Installment loans (e.g., student loans)
- Cell phone bills
- Car repossessions
A small amount of unsecured debt, such as a credit card with a low balance, can be a great tool. On the other hand, multiple lines of credit can quickly become overwhelming and do more harm than good. They generally have higher interest rates and shorter repayment terms than secured debts do.
Fortunately, Resolvly can help you to overcome your unsecured debt. Their team can inform you about your rights and options as a borrower so that you achieve financial freedom and debt collectors are held accountable.
More About Resolvly
Resolvly is a Florida Bar-approved lawyer referral service that helps clients nationwide to connect with consumer protection attorneys that specialize in debt resolution. The Boca Raton-based company was founded in 2015 and has helped thousands of Americans to find the right legal-based solution to reduce or dismiss their unsecured debt. The company can assist with all types of unsecured debt, including credit cards, medical bills, private student loans, business debt, and vehicle repossessions.