what is unsecured debt and why is it called that.?

Question

I have a friend that told me he had unsecured debt and that if he does not pay there is nothing the credit company can do. (He has since moved and left no address) It does not seem quite fair to me that the credit company,after trusting him has no recourse.

Answer 1

The credit company does have ways of satisfying the debt.. turning it over to a collection agency, taking him to court, which, BTW, will be on his credit record and he'll have a tough time convincing anyone else to give him credit with that showing up.... and there's more. If he doesn't pay back the company after the court determination, the loan will continue to accumulate interest at a high rate until it does get paid off... years from now he'll be in debt for thousands more than he ever owned on that original credit.

With a secured debt, the company would just take whatever was used to secure the debt... car, house, property.

Answer 2

Unsecured debt is a loan given to a person that provides no collateral to guarantee the loan. A credit card is unsecured debt since the only guarantee of payment is a promise to pay. The creditor can take the person to court to force payment or garnish wages to collect unless there is some sort of protection.

Answer 3

It is when you supply no security, like your home, car or other fixed assets to settle your debt. But it doesn't mean the credit company can't prosecute him. Legally he is bound by a purchase contract and if the company finds him, he can either go to jail or they will report him to the credit bureau, have him sequestrated and blacklisted.

Answer 4

there is no collateral. The credit company charges allot of interest on everyone because they know there are loose rs like him..Believe me they are making a killing