There are two types of loan namely secured and unsecured
loans.
Secured loan
Secured debts are loans
which have collateral attached to them in the form of a lien.
A lien is a monetary claim against a property to be fulfilled
before repeate ownership can take place. In other words, it
means the right to take other person's property if an
obligation is not discharged. An example would be a Loan on
your house. The mortgage company owns the house until you have
fulfilled the lien (mortgage) by paying off the amount you owe
to them. Thus secured debts are not negotiable in any way.
Mortgages (1st, 2nd & HELOC) and Car Loans are two common
examples of secured loans.
Unsecured loan
Unsecured Debt
broadly arises from a binding agreement you enter into with a
creditor, which helps you to obtain services or goods on
credit in exchange for your verbal or written commitment to
pay the creditor back. This is a debt not kept collateral by
any tangible possession and commonly includes medical bills,
credit cards, commercial debt, consumer debt and personal
loans. If you drop off on this type of debt, the only way left
to a Lender is to take legal action. Calculate your total debt
using debt
calculation form and start winning over debt. Debt
consolidation is applicable only with unsecured loans. For
example, if you borrow $100 from someone and is unable to pay
back, it is advisable for you to get the help of debt
consolidation. The debt consultant can negotiate with the
creditor to eliminate the late fees and taxes which has been
added to $100 because you could not meet up with the repayment
obligation. In most cases the creditor agrees since he has not
much option left. Sometimes he even reduces the principal
amount. The only option left is that he can go to the court
with the matter. This means additional money and a lot of
unwanted hassles. Ultimately you may find that you just have
to pay $60 in order to be debt free. However this depends on
how good a rapport you have with the creditor.
