Credit as a financial instrument is indispensable and in the United States, consumers depend on it heavily. Every major consumer spending like buying a home or a new car is usually backed by a line of credit and even the simplest daily needs like groceries and fuel are, in most cases, purchased on credit.
Although consumer credit is very popular, very few people actually have a clear cut idea of the different kinds of credit available to them. Broadly speaking, consumer credit can be classified as under:
Secured loans – A secured line of credit can be defined as a loan which is granted to a borrower who has pledged an asset of equal or greater value as collateral. In case the borrower fails to repay the loan or defaults on the loan, the lender may choose to confiscate and auction the asset against which the loan is secured. Classic examples of secured loans would include auto loans, title loans and mortgages.
Unsecured loans – On the other hand, unsecured loans and lines of credit are not extended against collateral assets. Lenders make their credit approval decisions based on the borrower’s credit history, his ability to repay previous loans and his FICO score. Since lenders face a greater degree of risk approving unsecured loans, they tend to seek legal action against borrowers who fail to repay their debts. Common examples of this form of credit include payday loans, credit cards, installment loans, etc.
Although this is just a very wide outline of the basic nature of consumer credit, there are varying definitions and classifications of the same. You can find out more about the subject here
could someone please tell me what is the differend...
By signing up a debt counseling session, your provided details (Name, Email ID and Phone No.) will be forwarded to the company advertising on the DebtCC. However, you have no obligation to use their services.
Some creditors and collection agencies refuse to lower the payoff amount, interest rate, and fees owed by the consumer.
Creditors/collection agencies can make collection calls and file lawsuits against the consumers represented by the debt relief companies.
Debt relief services may have a negative impact on the consumer's creditworthiness and his overall debt amount may increase due to the accumulation of extra fees.
The amount which the consumer saves with the use of debt relief services can be regarded as taxable income.