Loan: Secured or Unsecured?

 


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Loans are part of life for most people. Maybe you don’t realize it, but your credit card is a form of loan just like your home or your car. But there is one big difference! Your home loan and car loan are secured with a tangible, valuable piece of property you can sell or surrender in the event that you are unable to pay your loan. Not so with your credit cards. The difference between a secured and unsecured loan is whether or not some property or collateral secures the debt. If not, it is an unsecured loan.

Consumers tend to think of debt as bad and credit as good. It isn’t that simple and this way of thinking is part of what leads us into high credit card balances that drain our resources with high interest rates.

First of all, not all debt is bad. What is a good debt? Generally, a debt that will make you more money than you borrowed can be a good idea. While any investment may be a risk or a gamble in some respect, borrowing to gamble or take high risks is not advisable. But borrowing to invest in property or a business or some other investment is likely to be an excellent idea if you go into it with good planning, some experience with the investment you’re making and/or some good advice about the likelihood and rate of return you may expect.

Second, not all credit is good. Unsecured credit cards with high interest rates put you in a shaky financial position. It’s a good idea to pay as you go, rather than borrowing on credit cards for anything you cannot sell or surrender to pay off the debt. Unsecured debt will eat away at your financial security.

Get some good debt counseling to help you with your personal loans. Learn more about how to handle your individual financial position with the wisest use of both debt and credit. You can secure your future better if you have informed yourself about risks and repayments on your loans.

About this author

Richard Mettarod has worked as a consumer credit counselor for 18 years. Now he’s writing a book on when debt is okay. He hopes to help alleviate American’s debt issues, one financial statement at a time. You can read more articles about loans at Loan

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