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Types of Debt 

Below is a list of several kinds of debt, however most debt falls under two category.

These categories are secured debt and unsecured debt.

Secured debt are:

  • Mortgages

  • Automobile Loans

  • Loans can be either secured or unsecured

  • Equity Loans

  • Lines of Credit

All of the above loans are called secure debt 
because the debt is secured by a collateral.  

For example if you apply for a mortgage to buy a
house and get approved you must offer the house 
as collateral to secure the loan. Meaning if you default on the mortgage, the lender can take the house away from you in the form of foreclosure.

The same is true of automobile loans.  If you apply for a loan to purchase an automobile and is approved, the financing company will use the car that they is financing as the colleteral for the loan.  If you don't pay for the vehicle as arranged such as make the monthly payments the financing company can take the automobile in the form of repossession.


Unsecured Debt are:

  • Credit Card 

  • Student Loans

  • Payday Loans

  • Business Loan can be either secure or unsecure

These are called Unsecure Debt because there is no collateral offered to the company that's extending
the credit.  If you default on any of these debt, the creditors will have to collect their money some other way.

Here are some ways Creditors try to collect unsecure debt:

  • Hire a collection agency to collect the debt
  • Sue you in court and try to get a judgement placed on your credit ratings 
  • Garnish your wages  
  • Place a lien against your property
  • Report your credit to credit bureaus

Please note that not all unsecure debt is collected those ways.  Some creditors simply charge off the debt as a bad debt write off and then note this on your credit reports. The best way for you to handle any debt that you can't pay is to contact the creditor and talk with them to see what kind of arrangement you can make to clear the debt up.  Most creditors respect your financial situation and is very willing to work with you.


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                       Hi, I'm Abbie.
                       Your financial 
                       education tutor.

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