What is the difference between secured debt and unsecured debt?


There are different ways in which you can take out a loan. A distinction is mainly made between secured debt and unsecured debt.  

Secured debt

Secured debt is a loan where the bank takes a pledge on something you own, for example a home or a holiday property. The bank is then assured that you can repay what you owe, either by paying the bill or by that the bank takes over the property. Because this is a safer way for the bank to lend money, you often get a lower interest rate. Examples of secured debt are mortgages and car loans. Such loans are not always easy to obtain, and the bank may require equity in order for you to obtain such a loan.

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Unsecured debt

Unsecured debt is a loan you get without having to provide anything as security for the bank. It is a loan you get and which you are free to dispose of yourself. Because it is more uncertain for the bank whether you can repay such a loan, it will often come with higher interest and fees. Examples of unsecured loans are consumer loans and credit cards. These are loans that are easy to get, but often difficult to repay. 

Is refinancing with Kraft Bank secured or unsecured debt?  

In order to refinance through Kraft Bank, you must put up your own or someone else's home as collateral. This means that you get a loan that is secured, i.e. secured debt. It is because of this that we can often give you better terms on your debt than what you had before. Secured debt is cheaper than unsecured debt.  

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