Why are student loans considered unsecured debt

Is a Secured Loan or Mortgage Considered a Debt? [Duplicate]

This question already has an answer here:

Let's say you buy a home for $ 300,000, pay $ 100,000, and take out a loan of $ 200,000. The home was bought at a fair, reasonably valued value.

Does this mean you are now "in debt" $ 200,000? I read people who call this debt but it doesn't make a lot of sense to me. The house has a real value equal to the sum of your equity and your principle.

If the house were revalued for $ 250,000 a year later, I could see how that would lead to "real debt" and turn credit upside down, but as long as the assets backing a loan are worth more than the principle. Is it correct to say that you are in debt?

Is there more than one context for "in debt" in which it might be true in one sense and not true in another?

JPhi1618

Thanks @BenMiller, I did a bit of searching and felt like someone probably asked a similar question but didn't find this.

lb

Yes, it means you owe $ 200,000. If the value of all your assets is greater than the value of all your debts, you have a positive "net worth". It doesn't change the definition of debt.

If you owe someone money, you are in debt.

Pete B.

+1 from me. One of the negative aspects of debt is that the loan can be canceled. If one cannot secure other financing or cannot pay the balance, the asset must be liquidated. It happens.

JPhi1618

See, I have a hard time there ... If you have to pay back the loan, just sell the house and the loan is gone. You returned something (the house) to the bank (through a sale and the proceeds) and now there is no more debt. I think I see debt as a liability that you can't cover, and maybe that's a bad definition.

lb

If you owe the bank money, you are in debt to the bank. Whether or not you have assets that you could liquidate to repay the bank doesn't change your debt. Debt is debt, wealth is wealth. They merge "positive wealth" and "debt free". Secured debt only changes the risk profile of the loan because, as you said, the debt is theoretically secured against an asset whose value is sufficient to meet the debt.

mhoran_psprep

When the US housing bubble burst in 2006, the value of some homes fell below the balance of the mortgage. In order to get out of debt, the seller had to present cash with the settlement.

Phaedra

Is there more than one context for "in debt" in which it might be true in one sense and not true in another?

You may be thinking of the difference between secured and unsecured debt from Investopedia Link.

A secured debt is "secured" by collateral, as you mentioned in your comment on quid. Therefore, it is easier to unload, although it is sometimes expensive. Even without brokerage fees, there are admission and title fees for the sale of a house (at least in the US).

The unsecured charge is based on creditworthiness, not ownership.