Types of Debt - Secured Debt
Secured debts give the seller or creditor special rights. These are debts where the ownership of the item sold is not transferred entirely to the buyer, but is held as collateral for the debt until the amount owed is paid in full.
If you don’t pay the full amount on a secured debt (your car, house, etc.) the seller or creditor has the right to regain possession and/or title to the property. These transactions are based on written contracts and give the seller the power in the transaction. While there may be some type of court procedure, its really just a formality. If you haven’t paid your mortgage in a few months, the lender will file a foreclosure and take your house. There is no law suit involved. Its just a matter of filing the paperwork.
Because of the contractual nature of these debts, they are not as easy to take care of as unsecured debts. the seller/creditor has little reason to deal or bargain. They are going to get paid, or get their property back.
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