- December 7, 2020
- Posted by: Carter Davis
- Category: News
Do you know what’s at stake if you fail to meet a monthly repayment on your private student loan? If you know whether your private loan is secured or unsecured, you’ll know exactly what’s at risk if you begin to miss payments too often. Once you’ve learned about the differences between secured and unsecured debt, it’s necessary to ask yourself the following question: are private student loans unsecured debt? The answer may affect the time you have left to receive student loan assistance before collections efforts begin.
Secured and Unsecured Debt
For a brief refresher on secured and unsecured debt, remember that secured loans require the borrower to offer collateral as a backup payment method. This is common with auto and home loans, since your car can be taken if you fail to pay an auto loan and your home can be taken if you fail to pay the mortgage. Unsecured loans, on the other hand, require a lender to rely on the borrower’s credit score as a display of how reliably they make payments. These loans typically have higher interest rates than secured loans, as there’s no collateral.
It isn’t unheard of for lenders to offer secure private student loans at appealing interest rates. However, these secured private loans require the student to have something worth taking as collateral. Students commonly don’t own much after they leave high school, making it incredibly uncommon to find secured student loans.
If you have a private student loan, it’s likely unsecured. Unless you mistakenly signed onto a secured loan, your home, car, or any other collateral should be safe from your school loan payments defaulting. With any defaulted student loan payments, however, you need to be aware of wage garnishment. Wage garnishment can occur on federal or private student loans of any type and will forcefully take money from your paychecks and send it directly to your loan agency. Your property may be safe, but your money and wages are not.
When you need help determining whether your private student loans are unsecured debt, contact Hope Credit. We can provide you with student loan financial assistance and even prepare you to settle student loan debt once and for all.