What is unsecured debt?

An unsecured debt is one that is not tied to a property. Unlike a secured debt, if the debtor refuses to or can't make the repayments on the debt, the creditors (the person or business who lends money) will not be able to possess your house or your major asset or property in order to reclaim what was borrowed. In this case, the creditor can take you to court, but even then, it is unlikely that you would lose your home, unless they were prepared to make you bankrupt, which is less than likely in most cases.

Secured loans have added and attached security. Unsecured loans do not for this reason it is very likely that a loan which is unsecured will have less favourable terms such as a higher interest rate and even a fee for taking the loan out. Homeowners are often the target for secured loans, but unsecured loans are available from high street lenders and specialist lenders who deal with loans for tenants.

Unsecured debts are the only type of debt that can be included in an IVA or Individual Voluntary Arrangement, whereas ALL debts are covered by a bankruptcy. Unsecured debts such as credit cards, store cards, loans are still easier to get when the borrower has a property. However, people with generally good credit history can still gain unsecured borrowing, particularly credit and store cards. A good history of borrowing and repayment in a timely manner can also assist borrowers in building their credit history, and can help make getting a mortgage - probably the most important type of secured debt a little easier.

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