Secured vs. Unsecured Debt

Secured debt is a loan backed by collateral, meaning the lender can claim an asset (like a house or car) if you fail to repay. Common examples include mortgages and auto loans. Unsecured debt, on the other hand, has no collateral. Instead, it's based on your creditworthiness, so if you default, lenders can pursue you for payment but cannot take specific assets. Examples include credit cards and personal loans. Generally, secured debt tends to have lower interest rates due to the reduced risk for lenders, while unsecured debt usually carries higher rates.