Loans can be made for a variety of reasons, and the funds can be used for a variety of purposes.

For example, a person might make a loan to buy a car - this would be a car loan - or a person might make a loan to buy a home - this would be a mortgage. Both car loans and mortgages are what are called “secured” loans. A secured loan is one of the two basic types of loans; secured and unsecured.

A secured loan is one in which the borrower pledges tangible property as security to the lender. In the case of a car loan, the car is the tangible property. In the case of a mortgage, the home is the tangible property.

The law allows the lender to repossess tangible property that was pledged as security for a secured loan. The bank can repossess the car, and the mortgage company can foreclose on a home. Secured loans can be sought for many purposes (to buy a house, a car, a boat, a motorcycle, etc.).

Sometimes loans that are intended to be used to finance such things as a family vacation can be secured.

The vacation is not the pledged asset, but a borrower can use other property as security for the loan, and the loan proceeds however he wishes.

The other type of loan is an unsecured loan. Unsecured loans are loans for which no tangible property has been pledged.

Credit cards, gas cards, store cards, medical bills, hospital bills and dental bills are all types of unsecured loans.

The law does not allow any recourse for the lender in the event that a borrower defaults on an unsecured loan. The lender can’t repossess anything because there was nothing pledged as security. The lender can, however, make life unbearable.

They can call, knock on your door, and fill your mailboxes with second, third, and final notices.

Milos Pesic is a Debt Management consultant who runs a highly popular and comprehensive Debt Consolidation web site. For more articles and resources on debt management, debt consolidation programs, free debt counseling and much more visit his site at: http://debtpaid.info