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    Secured versus unsecured credit

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    Compare and contrast unsecured credit and secured credit, and explain the key differences.

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    Secured Credit:

    Credit in simple words is a process whereby the repayment of a debt is deferred. It is charging of interest for the use of another's (Lender) money. The rate of interest depends directly on the type of security provided to the lender, period for which the loan is taken, the purpose, background of the borrower, liquidity of the security provided, and safety of funds. Like any other business lending of money at a fixed or variable rate of interest is also a business. If you are in the transport business you hire out your vehicle to others for using it but at a hiring rate/price, you let out your house to others - tenant at a fixed monthly/yearly rent.

    These days you can not run a business without borrowing or deploying your own savings. Once the amount of savings is exhausted in the "running" of the business without due proportion of profit you go "bust" - become bankrupt. You need rolling returns of funds invested in the business either by way of income from sale of the products you deal in. Remember here again the entire return from the sales is not yours - you have to deduct from it the expenses incurred, bills paid, the funds utilized in buying inventory/raw-material, paid taxes, salaries to ...

    Solution Summary

    The solution compares and contrasts the unsecured credit and secured credit. They key differences are explained.