Secured Debt

Secured Debt

Debt backed or secured by collateral to reduce the risk associated with lending. An example would be a mortgage, your house is considered collateral towards the debt. If you default on repayment, the bank seizes your house, sells it and uses the proceeds to pay back the debt.

Notes:

Assets backing debt or a debt instrument are considered security, which means they can be claimed by the lender if default occurs. Obviously unsecured debt is higher risk, and as such lenders of unsecured money typically require a much higher return.

See also: Bond, Debt, Debtor, Debt Security, Default Risk, Loan, Secured Note, Unsecured Debt, Writ of Seizure and Sale

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Secured debt

Debt that has first claim on specified assets in the event of default.