Re: Informal Bankrupcy-LadyNred

Posted by Drew (24.59.27.46) on February 04, 2004 at 13:46:50:

In Reply to: Re: Informal Bankrupcy-LadyNred posted by jo on February 02, 2004 at 16:16:15:

Example of unsecured debt becoming secured.

The most common way that people convert unsecured debt into secured debt is debt consolidation by refinancing their homes. They get a debt consolidation loan to pay off credit card bells using their house or their car as collateral. THe debt has not gone away just because you paid it because you didn't really pay it off. You incurred a new debt to pay it off. This is called a money transfer. All the debt that was previously unsecured is now secured and there is in effect a lien placed against your home for that loan until that loan is paid off in full. People do this for a lot of reasons. The interest rates on a debt consolidation loan are better than the interest rates on their unsecured credit cards. However if you pay it off, you have done a good thing but if you default on the loan, there is now claims after you.

Follow Ups:

Post a Followup