Secured Debt

Secured debt is borrowed money, or a loan, that is secured against something, like a house, a car or property, that can be taken from you if the money is not repaid. Unsecured debt, on the other hand, is borrowed money that has nothing concrete secured against it, such as credit cards, personal loans, retail and gas cards and outstanding medical bills.

Secured debt allows debtors to borrow at lower and more manageable interest rates and receive additional borrowing privileges; meanwhile offering the creditors a stronger promise that the debtor will return the borrowed money.

Contractual Agreements, Liens and United States Law of Debt Secured by Property

Contractual agreements, statutory liens or judgment liens indicate secured debt.

A Purchase Money Security Interest (PMSI) loan is a contractual agreement that secures the item(s) purchased (i.e. vehicle, furniture, etc.) and can be repossessed if the payments are not being made. Another type is a Non-Purchase Money Security Interest (NPMSI) loan where items already owned by the debtor are noted as the security.

Liens are the most common form of secured debt and generally refer to real estate purchases. Liens on real estate purchases are a legal claim on property and security for repayment.

A mechanic’s lien, also know as a construction lien, is put in place when payment for improvements to the property have not been made. The landowner does not own the property until the debt is paid, and each state has its own law regarding a mechanic’s lien. A mechanic’s lien is a separate agreement and is not required to be put into place by the title owner.

Secured transactions, such as the sale of personal property, generally follows the Uniform Commercial Code and indicates the creditor’s interest in the property and what legal action will be taken if the debt is not repaid.

Seizure and resale of the property is the standard practice, but the debtor may be able to hold on to the property and make late payment arrangements according to the law.

Disclaimer:   Debt Consolidation Deals, Inc. does not provide legal, investment or Tax advice. If a client needs legal services or legal expertise, they must seek the advice of a licensed attorney. Individual program results may vary.