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Is House Rent a Non Secured Debt?

Understanding the difference between secured and unsecured debts is vital in maintaining a healthy credit score and credit report. While rent isn't considered a secured or unsecured debt, it is a payment for a service that reflects your level of responsibility as a consumer. Although your rent isn't a debt tied to an asset, you may lose the privilege of living in the rental property if you fail to make payments, just as a lender would revoke the collateral if it were a secured loan.

Unsecured Debts

    Unsecured debts are debts without the security of collateral. Collateral is money or an object the lender can take if you fail to make payments on a loan. Credit cards, bills for medical care and personal loans are generally unsecured debts. Usually, unsecured loans carry higher interest rates because they're a higher risk for lenders. Also, unlike home equity loans and lines of credit, in which the home is the collateral, personal loans aren't tax-deductible.

Secured Debts

    Secured debts are those tied to an asset or bank account. Car loans, mortgages and home equity loans are examples of secured debts; if you cannot or do not make payments to either of these loans, the lender has the right to take away your car or home. Sometimes, people who are building or re-building credit may use a secured credit card to create a history of payments. These cards are tied to an account with money in it, which may be withdrawn by the lender if the borrower fails to make payments.

Rent

    Unless you are behind on your rent payments and you owe money to your landlord, rent is not considered a debt. Instead, it is a payment for a service rendered. The service is the landlord allowing you to live on the property. Since secured debts require a creditor to lend money to the borrower for ownership of a certain asset, rent is not a secured debt.

Considerations

    Although rent is not a secured debt since the landlord isn't lending you any money, the landlord may evict you if you fail to pay your rent. Furthermore, your landlord may report delinquent payments or an eviction to a collection agency, which can eventually end up on your credit report. Such a citation may make it difficult to qualify for new housing and credit in the future.


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