Definition / Defined:
A
"Secured
Debt" is a debt backed by a lien.
A lien
may be a voluntary lien (such as a
mortgage, trust deed,
or other pledge of collateral). A
lien may be an involuntary lien
(examples: court judgment lien [abstract of
judgment], or tax lien).
A secured
debt is a debt by
which the creditor / lender has the right to pursue specific pledged
property upon
default of an obligation.
It
is a debt that is backed
or secured by collateral in order to reduce the risk
associated with
lending.
Because
there is property or an asset backing the debt, the lender can often
loan money
at a lower rate than a higher risk unsecured debt money loan, e.g.
credit card.
A
common example of a secured
debt would be a mortgage
(or deed of trust) where your house is considered collateral towards
the
debt. If you default on repayment, the bank may
foreclose, sell your
house, and use the sales proceeds to pay back the debt.
Car and vehicle loan
installment debts are typically
secured debts.