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Originally Posted by GioforPM
And "all debt" is not considered leverage. I borrow $100 from a buddy - I've leveraged nothing. It's only secured debt that's considered leverage.
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Leverage has nothing to do with whether it is secured. Leverage refers to the fact that you have risked more then your investment. If I buy a $100 stock with cash and it goes bankrupt I lose my original investment of $100. I cannot lose more (no leverage). if I buy a stock with $50 cash and $50 debt and it goes bankrupt I lose $100 on my initial investment of $50. On the other hand, if it goes up to $200 I have 3x my money instead of 2x (Ignoring interest I get $150 on my $50 investment after paying back the loan) which is why people use leverage.
Secured" or "unsecured" simply refers to the lenders place in line on specific assets if they don't pay. lenders like secured debt because it reduces the risk of not getting paid back since you are at the front of the line on the underlying asset that secured the debt. The value of secured debt to a lendee is that, because there is improved expected recovery in the case of default lenders will typically offer better rates (think a mortgage and how you can get a lower interest rate if you put down less then 20% because you have CMHC insurance), not because it changes whether or not you are levered.
If you borrowed money from your buddy for an investment you are absolutely levered if there is actually a requirement to pay them back even if the loan is not specifically secured because you are still leveraging your "wealth".