Financial debt can come in all shapes and sizes, and, unfortunately, it’s an anxiety that many individuals in the United States feel at some point in their lives. There are number of ways that debt can manifest itself, but no matter what the finer points may be, it’s almost always true that financial debt should be resolved quickly and efficiently, lest it cause critical problems for individuals and their family members later in life. There are a few different ways to go about negotiating and settling debt with credit card companies or other lenders, but first, it’s important to know everything you can about your financial situation and the specific details of your debt. One of the most important factors about your debt is whether it’s unsecured or secured. The process for getting an unsecured debt settlement is going to be different than it would be if your debt was secured. No matter what, understanding the difference between the two is an important part of paying off debt, be it credit card debt or otherwise.
What Type of Debt is Unsecured?
Typically, an unsecured debt settlement will come about when you’re trying to resolve a debt that hasn’t been secured against a piece of property that you own as collateral. These usually come from common types of loans like student loans, credit card charges, utility or service provider bills, and the like. Personal loans are also considered unsecured. Essentially, any unsecured loan is one whose terms did not require that you offer up a piece of property like a car, boat, or house, as collateral. One exception to the rule is an automotive loan, which is almost always going to be secured, with your car as collateral.
Defaulting on an Unsecured Loan
When secure loans are not paid off, the lender’s reaction is simply to re-possess whatever piece of property was offered up as collateral. This basically ensures that the lender is compensated to a degree that is at least close to the amount of the original loan, even if that compensation came in the form of a piece of valuable property, as opposed to simple cash.
If you don’t pay off an unsecured loan, however, and have yet to negotiate an unsecured debt settlement, the most common courses of action involve lawsuits and collection agencies. A lender who has not been paid back will likely first contact a collection agency, who will then take on the responsibility of obtaining the funds from you. You might be able to negotiate your unsecured debt settlement with the collection agency, as well. Whatever the case may be, unsecured debts can be very problematic if they’re not paid back. Settling this type of debt, though, is absolutely possible when you’re armed with the right information.