Unsecured debt is a debt or loan that is not secured by any form of collateral (asset or property) such as your residence, a car, or recreational vehicle. The most common forms of unsecured debts or loans include:
– Money, services or goods that you have received through a credit card, line of credit or bank overdraft;
– Services you have received in the form of power, gas and water, cable and internet, cellular telephone and medical and dental services; and
– Services provided by government for which you are the required to pay income tax.
Unsecured debts or loans present a higher risk for lenders and service providers as they hold no collateral as security for the money, services or goods you received. Because the lender or service provider holds no collateral as security, the debt is unsecured. Unsecured debts generally have a higher interest rate when compared to a secured mortgage or loan.
If you default in your payments the lender or service provider has no collateral to seize from you to recover the amount you owe. The service provider or lender will have to sue you to recover the money they’re owed.
Typically, all unsecured debts are included in a consumer proposal or personal bankruptcy debt restructuring plan.
Thank you all for making a not so happy time a positive learning experience.
Kelvin & Deb J.