Definition
Debt backed by collateral the lender can take, like a mortgage (house) or auto loan (car). Rates are lower than unsecured debt because the lender's risk is lower; yours is higher.
Why it matters
Collateral is why secured rates are cheap and why secured debt is dangerous: defaulting does not just hurt a score, it takes the house or the car. Payment priority in a crisis follows the collateral.
Example
In a tight month, a household pays the mortgage and car loan before the credit cards: the secured lenders can repossess and foreclose, while the unsecured card issuer's leverage is a credit score, not the family home.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.