Essential Personal Finance Terms: Unsecured Debt

If saddled with unsecured debt that they cannot pay off, some individuals may decide to contact a bankruptcy attorney regarding their options. As this video explains, unsecured debt typically translates into inflated interest payments, which makes it extremely difficult for borrowers to reduce the amount that they owe.

Unsecured debt is money that you have borrowed for which you have no collateral if you cannot continue making payments. Two popular types of unsecured debt are credit card debt and student loan debt. In contrast, two forms of secure debt are house mortgages and car loans. If you cannot uphold your financial obligations to pay back these debts, both your home and automobile can be seized. In short, the house and car are the collateral for lack of payment.