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If you’re juggling different kinds of debt, it helps to know what type of debt you’re dealing with, especially when deciding what to pay first or what’s putting you most at risk.
Most debt falls into two categories: secured or unsecured. Let’s break them down.
🔐 What Is Secured Debt?
Secured debt is backed by an asset—something the lender can legally take if you don’t repay.
Examples of secured debt:
- 🏠 Mortgages (secured by your home)
- 🚗 Auto loans (secured by your car)
- 💳 Secured credit cards (secured by a cash deposit)
If you don’t pay:
The lender can repossess or foreclose on the item. It’s serious. Missed payments also show up on your credit report, and your score can drop fast.
If you do pay on time:
These loans can help build your credit. Many people use secured cards to rebuild their score after financial setbacks.
📬 What Is Unsecured Debt?
Unsecured debt isn’t backed by anything. The lender gives you money or access to credit based on your trustworthiness—your income, credit history, etc.
Examples of unsecured debt:
- Credit cards
- Medical bills
- Personal loans
- Some student loans
If you don’t pay:
The lender can’t take your property directly—but they can send your account to collections, sue you, or report it to credit bureaus, hurting your score and creditworthiness.
💡 How This Affects You
🧭 So, Which Should You Focus on First?
If your debt feels unmanageable, here’s a rule of thumb:
- Prioritize secured debt first to avoid losing something essential (like your car or home)
- Then look at unsecured debt—especially if it’s in collections or racking up high interest
If most of your overdue debt is unsecured (like credit cards or medical bills), Relief might be able to help.
We’ll help you request a lower balance and avoid the back-and-forth usually required to settle debt.
⚠️ Disclaimer: Relief does not provide financial advice. The information in this article is for educational purposes only and should not be considered a substitute for professional financial guidance. Please consult a certified financial planner or advisor for personalized support.
Links to external websites are provided for convenience and informational purposes only. Relief is not affiliated with these third-party sites and does not endorse or guarantee the accuracy of their content.
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