Page 19 - Book1E

CHAPTER 3
About Secured and Unsecured Debt
In your efforts to control your spending and eliminate the use of credit cards to become debt free, it’s important to understand the difference between secured debt and unsecured debt.
Secured Debt
In a nutshell, secured debt is debt that is backed by, secured by, or guaranteed by collateral or property such as a home, automobile, boat, etc. If you don’t make your scheduled payments, the creditor has the legal right to take back or repossess the property that is designated as the collateral. If you’ve ever lived through the experience of having a car repossessed because you didn’t keep up on your loan payments, then you already know how secured debts work.
Please remember that paying these secured debts should be a top pri- ority. If you don’t pay them, you will lose the collateral backing them up. Even if you are not being contacted by these creditors, please don’t think they won’t collect the debt. Because collectors of secured debt have the power to seize the collateral if you stop making payments, they don’t need to harass you the way that collectors of unsecured debts do. They will just show up at your door.
It’s important for us to note here that there is such a thing as a secured credit card. This is typically a major national credit card such as Visa or MasterCard that has a credit limit that the consumer secures by placing a cash deposit with the bank issuing the credit card. Using such a card
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