Understanding Unsecured & Secured Debt In Scottsdale

Secured vs. Unsecured Debt In Scottsdale

Secured vs. Unsecured Debt

When looking for a loan it is important to understand what type of loan you are receiving.

Scottsdale, Arizona

When you need to borrow money in Scottsdale,Arizona, you have two options: Secured debt or unsecured debt. You may not think of your options in those terms. Instead, you might think about a mortgage or a home equity loan, or you might consider using credit cards or getting a payday loan. However, understanding the difference between secured and unsecured debt is key to selecting the right options to meet your financial goals.

What is Secured and Unsecured Debt?

To start, you need to understand what the terms “secured debt” and “unsecured debt” mean. Secured debt is any loan that is secured, or guaranteed, by collateral like property or savings. A home loan is a secured loan because if you default on your mortgage, the house can be seized to pay the debt. A pawn loan is a secured loan because you pledge collateral — the items being pawned — when you get the loan.

Unsecured debt is provided without any security. Credit cards are the most common type of unsecured debt. If you don’t pay your credit card bill, you’ll get some nasty marks on your credit report, but no one will seize your assets. Other types of unsecured debt include payday loans or overdraft protection.

History of Secured and Unsecured Debt

It may be hard to think that a time ever existed in which credit cards were not available. However, they were not introduced until the 1950s. Other forms of unsecured debts, like payday loans, did not become popular until later in the 20th century.

Secured debt like home mortgages also have a relatively short history. Mortgages were not made available until the 1930s, and even then, they were only available for part of the purchase price (typically about 50 percent).

Interest and Risk

Unsecured debts have historically been far riskier than secured debts, primarily because they come with much higher interest rates. The interest rate on a credit card can easily hit 30 percent, and the interest rates on some payday loans can be far more. If you are only paying the minimum amount each month on unsecured debts, you will end up paying thousands in interest and it will take years to pay off.

Secured debts have much lower interest rates, and most borrowers are more diligent about making the payments since they have property to lose if they don’t. If you have great credit, you can get a home loan for interest rates around 5 percent or less. If you get a pawn loan, you can enjoy even lower interest rates.

Pawn Now offers safe, secure pawn loans to help you get the money you need, whether to consolidate your debt or to raise the money you need for a home or starting a new business. We have made loans up to $1 million, and our facility is big enough to handle any items you want to pawn, including real estate or automobiles. Pawn Now In Scottsdale offer low rates to make the loans affordable.

Secured v unsecured Loans | Pawn Now