Secured Debt Definition

• A secured debt is a loan obligation associated with an item of value. A mortgage loan is associated with a lien on a house. A car loan is associated with a lien on a vehicle. Some lenders assign a lower risk to this type of obligation because the bank can repossess the asset of value if necessary to satisfy some or all of the secured debt.
  
  

Cell Phone Contract

• When an individual enters into a cell phone contract, the process is similar to agreeing to a loan. The individual must sign an agreement that states he must make monthly payments regularly on time and in full. The cell phone company also often requires a termination fee if the contract isn't fulfilled. After the contract is up and the cell phone customer continues to use the service, it is similar to a month-to-month rental agreement.
  
  

Non-Secured

• A cell phone contract is not usually considered a secured debt. Though the account is sometimes associated with an item of some value, a cell phone handset, a cell phone company likely will not attempt to repossess a customer's phone. Besides the impracticality of a repossession, a cell phone is one asset that quickly depreciates in value due to wear and tear. So many cell phone companies or collections agencies will treat this as an unsecured obligation.
  
  

Other Considerations

• When a customer fails to meet a cell phone obligation, he may experience long-term problems securing a future cell phone contract. If the debt collector or cell phone company reports negative information about the account to credit bureaus, it remains on the consumer's credit history for seven years and may lower the credit score. It can also create problems securing other forms of credit. Also, in some cases a cell phone company can seek a judgment against a consumer for a cell phone debt.