Your Debt - Secured or Unsecured

what is YOUR DEBT? All loans, no matter what they are, are either secured or unsecured. SECURED LOANS UNSECURED LOANS 1 Secured (or borrowed) against an asset you own, such as your home - which is offered up as collateral. 1 Are not secured against any assets. If you default on the loan, the bank will get their money back by way of foreclosing your house (or otherwise seizing the collateral). The bank can only utilize collectors (and freeze your accounts) if you default. The interest rate should be very low (close to prime rate). The loan amount granted is largely attributable to your credit history and income/assets/debts at the time of application. The better your credit rating is, the more bargaining power you have with the terms, including loan amount and repayment period. There is a considerably higher assumption of risk on the bank's part with an unsecured loan so the interest rate is much higher. Payment terms are flexible, and can even be structured as "interest-only". PERSONAL LOANS PERSONAL LINES OF CREDIT 6. If the loan is secured against the equity in your home, the application process usually involves a "drive by appraisal" of your home and some legal fees, that together amount to a few hundred (up to a thousand) dollars CREDIT/DEPARTMENT STUDENT LOANS STORE CARDS CAR or RV MORTGAGES HOME EQUITY LOANS | HOME EQUITY LINES OF CREDIT LOANS REVOLVING DEBT - Is money owed to a creditor who sets your monthly payment based on the current balance. Ex: credit cards or retail store cards - each month your balance varies based on your spending activity from the previous month and any unpaid amount is rolled over or "revolved." WHO OWNS OUR DEBT? INSTALLMENT DEBT - Is money owed to a creditor who expects repayment O00000XKRO over a fixed period of time made in equal monthly amounts. Ex: a mortgage or a car loan - you are making the same payment over a fixed schedule of time. OPEN DEBT - Is the least common type of debt and means that each month you run up a balance and pay it in full when you get your bill. Ex: your cell phone or American Express Green Card - you don't have a predefined credit limit and you have to pay the balance in full each month. Consumer Debt Share by $894-36% MAJOR TYPES OF CREDIT 12% 11 41% Commercial banks $362.5 13% TOTAL OUTSTANDING CONSUMER CREDIT Finance companies $46.4 $1584.8 - 64% %3D $2478.8 BILLION Credit unions $35.4 28% 45% Saving Institutions $38.1 Commercial banks $492.9 31% Nonfinancial business $8.8 Finance companies $441.3 Credit unions 5201.7 Pools of securitized assets $402.8 Federal Government $186 Saving Institutions $39.5 * amounts expressed in billions Nonfinancial business $48.4 NONREVOLY Pools of securitized assets $174.9 Sources: wisebread.com, credit.com EXAMPLES OF SECURED LOANS REVOLVING EXAMPLES OF UNSECURED LOANS