Definition
An unsecured debt is any borrowed amount that must be repaid to a creditor in which there is no collateral to guarantee the loan.
Analysis
Unsecured debts tend to be of relatively small amounts for consumers with modest credit, but they can rise into the tens of thousands of dollars for consumers that have good credit and higher income. These differ from secured loans which require a security interest in the loan.
Unsecured debts can take many forms. These include:
- Signature/personal loan
- Promissory note
- Credit card
- Store card
- Line of credit
Consumers that allow an unsecured debt to go into default do not have to worry about seizure of collateral to satisfy the debt. Creditors do however have other options to pursue repayment, depending on your state of residence. These can include:
- Report negative information to credit bureaus
- Place collection calls
- Turn over to outside collection agency
- Pursue a judgment
- Garnish wages
A debtor seeking to resolve unsecured debt may wish to complete a debt counseling session with an Accredited Financial Counselor. Some forms of debt relief from unsecured debt accounts may include:
- Self-guided repayment plan
- Debt management plan
- Debt settlement
- Bankruptcy
Ignoring the problem can also workfor older debts for which the statute of limitations has already expired. Ignoring larger and newer unsecured debts could cause drastic credit and legal troubles for the debtor.
