Secured Debt vs Unsecured Debt: Understanding Their Differences

If you are trying to manage debt or planning to apply for a loan, knowing the details about secured debt vs unsecured debt is critical. It is important whether a debt is secured or unsecured because it can impact your ability to pay it back, as well as the interest rate and terms of repayment.

To put things simply, the main difference between secured and unsecured debt is that secured debt is backed by collateral, while unsecured debt is not.

Collateral is an asset or assets from the borrower which acts as a guarantee to the lender that the debt will be repaid. If the borrower fails to repay the debt, the lender can seize the collateral and use it to recoup their losses.

Interested in learning more about secured debt vs unsecured debt? Read on for a detailed explanation of each type of debt, as well as their key differences.