Credit & debt · Module 4 of 8
Which debts are worth it
Secured versus unsecured debt, borrowing that builds something versus borrowing that doesn’t, and loans built to trap you.
Key terms in Which debts are worth it
- Secured loan
A secured loan is a loan in which the borrower’s property, such as a house or a car, is pledged as collateral. If the borrower does not repay, the lender has the right to take the collateral. Because the lender has that backup, secured loans often carry lower interest rates than comparable loans with nothing pledged.
Source: Consumer Financial Protection Bureau, Financial terms glossary
- Unsecured loan
An unsecured loan is a loan that does not use property as collateral. Most credit cards are an example. Lenders rely on the borrower’s credit history and income instead, and because they carry more risk without an asset to claim, unsecured loans tend to come with higher interest rates. Missed payments can still lead to collection efforts and credit report damage.
Source: Consumer Financial Protection Bureau, Financial terms glossary
- Predatory lending
Predatory lending is a set of abusive practices in which a lender profits through unfair terms or deception. The Federal Deposit Insurance Corporation points to making loans based on the borrower’s assets rather than ability to repay, repeatedly refinancing to generate fees, and concealing the real nature of a loan. It differs from legitimate subprime lending to borrowers with weak credit.
Every term on Lever is in the money glossary.
About this module
Which debts are worth it is part of Credit & debt, one of 15 subjects in Lever. It’s a short run of 7 lessons, about 18 minutes in all, so you can finish it in one sitting.
Every lesson takes one idea at a time. You read it with the math worked out step by step, answer a question that puts it to use, then see why the right answer is right and why the others aren’t.
It’s for anyone who was never taught this, and you don’t need to know anything first. Every lesson is free. Lever works out what you already know, so you can start here or let your path bring you to it.
More in Credit & debt
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1
What a balance actually costs
How credit cards charge interest, when carrying a balance is free, and when it starts costing you every day.
9 lessons -
2
The number they look you up by
What your credit score is, what goes into your credit report, and the habits that move the number most.
8 lessons -
3
What a loan is made of
Where each loan payment goes, the fees hiding outside the rate, and how to compare two offers fairly.
7 lessons -
5
Clearing what you owe
Two proven ways to pay off debt, the cheapest and the easiest to stick with, plus how balance transfers work.
6 lessons -
6
Changing the deal you already signed
Your debt isn’t set in stone. Negotiating, refinancing and consolidating, and what each one costs.
5 lessons -
7
What the loan actually bought
When a car or a degree loses value faster than the loan shrinks, and how to avoid owing more than something is worth.
7 lessons -
8
Paying in pieces
Buy now, pay later and interest-free instalments: when they’re really free, and when they get expensive fast.
5 lessons
Try this module
It’s part of Credit & debt. Lever will bring it to you when you’re ready, or you can go straight there.