A secured debt is one in which the debt has been collateralized by something of value which exceeds or is equal to the value of the debt. Examples of a secured debt is a car loan in which the creditor upon the borrowers default on the loan may repossess the vehicle. Another example is a home mortgage where the mortgage loan is secured by the home itself. A unsecured debt leaves the creditor only with the debtor’s promise to pay. There is no collateral upon which to guarantee the loan. An common example of a unsecured debt is the credit card.
Most laws governing secured loans in the sale and purchase of products is governed under the Article Nine of the Uniform Commercial Code or your state’s equivalent of this federal law.« Back to Glossary Index