Unsecured Loan Definition: An unsecured loan is an amount of money you borrow without the need for collateral. A lender will approve a loan based on a customer’s creditworthiness, established on a credit rating and history. Examples of unsecured loans include some lines of credit, credit cards, personal loans, and student loans.
In contrast, a secured loan requires an asset, such as property, to be applied as collateral if a borrower defaults on loan payments. Since unsecured loans are riskier to the lender, a much higher credit score is usually required to qualify for a loan. In some cases, higher interest rates may apply for an unsecured loan.
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