Are Credit Cards Unsecured Debt?

Debt can come in many different forms, including revolving debt, installment debt, credit card debt, car loan, mortgage, personal loan and lines of credit. Some of these types of debt are secured and others are unsecured.

Identification

Unsecured debt is any money owed that does not have any collateral attached to it. Secured debt is any money owed that does have collateral attached to it.

Considerations

Most credit cards are a form of unsecured debt; however, if you gave the lender a deposit to send you a credit card, then it is a secured debt and the collateral is the money you sent them. According to Bankrate.com, this is known as a secured credit card.

Potential

People with poor credit may be able to get a credit card or personal loan by offering collateral and making the debt a secured debt. Collateral is usually in the form of a money deposit.

Significance

According to the law firm of Weintraub & Selth of Los Angeles, when you have secured debt the collateral can be seized if you get behind on your payments. With unsecured debt, the lender cannot seize any of your property without a judgment and court order.

Warning

According to Nolo, a legal information website, if a judgment is entered against you by the court for non-payment of an unsecured debt, the lender can gain permission to seize some of your property. This is usually in the form of garnishing your paycheck or taking funds from your bank account.

References

• Nolo.com: Collect Your Court Judgment With a Wage Garnishment
• Weintraub & Selth: Secured Debt
• Bankrate.com: 10 Questions Before Getting Secured Credit Cards