Banks tell you that you will pay a higher interest rate on unsecured credit because they hold no security on it.Many people have been sued for not paying unsecured debt and liens were placed on their homes,property and vehicles.Their wages were garnished and their banking accounts were seized or frozen.So unsecured debt is not really unsecured.
Following that logic, in a sense, there is no such thing as unsecured debt. Your signature and good faith provides the security for the debt. In the real world however, unsecured debt would simply mean that the creditor does not directly hold title to the property, ie you are the sole owner of the purchased item. It is only after judicial intervention that a creditor can attach a lien to property and often it is not the property fron the initial transaction. Example, debitor goes to store and purchases a new stereo on credit. Debtor fails to pay for stereo. Creditor seeks judicial intervention and attaches lien to debtors house. Debtor still owns stereo but now has to pay for it before selling his house. Anyway, what was the point of the post?
The point is charging more interest because the credit is unsecured is a false premise.All loans are secured one way or the other.Credit card issuers charge high interest using this reasoning.It is misleading.Were going to charge you 19.9% interest because this loan is unsecured otherwise if this loan was secured we would only charge you 6% but if you do not pay this loan we will sue you and put a lien on your house or car or garnish your wages or seize your bank account but this loan is unsecured.It reminds me of the commercial where a company says we will send you absolutly free a 30 day supply of this product honest it wont cost you a penny to try it just pay the 9.95 shipping and handling fee.
Interest is simply the price of the money. The bank, or your neighbor, or your loan shark can come up with whatever reason they want to charge the rate they want. You can agree or disagree with the reason (excuse) they give as you see fit. In the end, all you really have direct control over is whether you find that price acceptable or not.
Your best defense is being able to walk away from any deal, and having access to the widest market in anything you want. If one party thinks they can stick it to you, with good credit some other party will undercut them. There are no shortage of companies you should not intelligently choose to do business with.
Your hypothesis rests on the assumption that any debt ipso facto becomes a judgment, because that is the only way a creditor with an unsecured claim can make it a secured claim. Obviously, if you own no assets, then evena judgment will not convert an unsecured claim into a secured one. Even with assets, and a job, there are many ways to make pursuinga judgment an exercise the creditor will think long and hard about. Insice CN, buried somewhere in the depths of history, you will find a series of essays I wrote some time ago. These essays deal with just this topic - how to frustrate Collectors, CA's, JDB's and even Attorneys.
