One of the things that you will hear a lot about right now concerning debt is secured v. unsecured debt. In terms of your home mortgage loan, this difference is a crucial one to understand.
Secured debt
Secured debt is debt that is backed up by something tangible. Your home mortgage loan is an example of secured debt. If you don't make your loan payments, then there is something physical that mortgage lenders can go after to recoup some of their losses: your home.
Unsecured debt
This debt is debt that is not backed up by tangible assets. Regular credit cards are an example of unsecured debt. Other than going after your credit score, creditors who give you an unsecured loan have few recourses. And they can't go after tangible assets, such as your home, to pay off the debts. This is why it is possible to get a larger loan when you use secured debt.
This is why it is so dangerous to decide to use a home equity loan to pay off credit cards. You taking something unsecured and tying it to your home.
image credit: sxc.hu
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