California residents who are in debt may be interested to learn the difference between secured debt and unsecured debt. Because each type of debt will have different consequences for nonpayment, understanding the difference may be important for a person who is working on a debt repayment plan.
A secured debt is a type of debt that is attached to a physical object like a car or a house. If a borrower does not pay a car loan, for instance, the lender can seize the person's car. A mortgage, which is also a secured debt, works the same way as a car loan. If the borrower fails to make mortgage payments, the lender can seize the person's house in a foreclosure.