FAQs
Mortgages, home equity loans, home equity lines of credit (HELOCs) and auto loans are all forms of secured debt. Personal loans, credit cards, student loans and medical loans are some forms of unsecured debt.
What are the different types of debt? ›
Different types of debt include secured and unsecured, or revolving and installment. Debt categories can also include mortgages, credit card lines of credit, student loans, auto loans, and personal loans.
What is an example of secured debt? ›
If you have pledged property as collateral for a loan, the loan is called a secured debt. Examples of secured debt include homes loans and car loans. The loan is secured by the car or home, which means that the person you owe the debt to can repossess the car or foreclose on the home if you fail to pay the debt.
What are the two most common forms of secured debt? ›
The two most common examples of secured debt are mortgages and auto loans. This is so because their inherent structure creates collateral. If an individual defaults on their mortgage payments, the bank can seize their home. Similarly, if an individual defaults on their car loan, the lender can seize their car.
What qualifies as unsecured debt? ›
The term “unsecured debt” refers to financing that is not backed by collateral, which is an asset that you own, such as your home or a vehicle. Personal loans, credit cards and student loans are all examples of common types of debt that are unsecured.
What are the example of secured and unsecured loans? ›
Mortgages and auto loans are types of secured loans. Unsecured loans don't require collateral but may charge a higher interest rate and have tighter credit requirements because of the added risk to the lender. Many personal loans and most credit cards are unsecured.
What is debt classification? ›
Debt classification is typically a key component in calculating ratios that prospective investors and lenders (creditors) use to gauge a reporting entity's liquidity and credit risk. In addition, balance sheet classification can impact contractual covenant compliance.
How else can debt be classified? ›
Debt can be secured or unsecured, with a fixed end date or revolving. Consumers can borrow money through loans or lines of credit, including credit cards. Corporations can also issue debt in the form of bonds to raise capital.
What are the four main types of debt securities? ›
Bonds (government, corporate, or municipal) are one of the most common types of debt securities, but there are many different examples of debt securities, including preferred stock, collateralized debt obligations, euro commercial paper, and mortgage-backed securities.
Which type of debt is often unsecured? ›
Examples of unsecured debt include credit cards, medical bills, utility bills, and other instances in which credit was given without any collateral requirement. Unsecured loans are particularly risky for lenders because the borrower might choose to default on the loan through bankruptcy.
Student loans, personal loans and credit cards are all example of unsecured loans. Since there's no collateral, financial institutions give out unsecured loans based in large part on your credit score and history of repaying past debts.
Is a credit card secured or unsecured debt? ›
Credit card debt is by far the most common type of unsecured debt. If you fail to make credit card payments, the card issuer cannot repossess the items you purchased.
Which type of debt is most often secure? ›
Common types of secured debt for consumers are mortgages and auto loans, in which the item being financed becomes the collateral for the financing. With a car loan, if the borrower fails to make timely payments, then the loan issuer can eventually acquire ownership of the vehicle.
What is the simplest most common form of debt? ›
In the simplest terms, a person takes on debt when they borrow money and agree to repay it. Common examples are student loans, mortgages and credit card purchases.
What types of credit are secured? ›
Home equity lines of credit (HELOC) also fall under the category of secured credit, because you're borrowing against your home's equity (the amount you've already paid off). Other secured products include: Secured credit cards. Pawnshop loans.
What are examples of unsecured creditors? ›
Some of the most common types of unsecured creditors include credit card companies, utilities, landlords, hospitals and doctor's offices, and lenders that issue personal or student loans (though education loans carry a special exception that prevents them from being discharged).
How many types of secured loans are there? ›
The two types of secured loans that are most frequently used are home and auto loans, which require the borrower to put up the property or car they want to buy as collateral before the loan can be approved. Which loan is less expensive? Home loans and other secured loans are the least expensive loans in India.
Is credit card debt secured or unsecured? ›
Credit card debt is by far the most common type of unsecured debt. If you fail to make credit card payments, the card issuer cannot repossess the items you purchased.