Unsecured Debt

Unsecured debt refers to loans or credit that are not backed by an asset or collateral. This means that if the borrower fails to repay, the lender cannot claim specific property to recover their money. Common examples include credit card debt, personal loans, and medical bills. Because there is no collateral, unsecured debt typically carries higher interest rates than secured debt. Lenders assess the borrower's creditworthiness and ability to repay before extending unsecured credit. If a borrower defaults, the lender may take legal action to collect the debt but cannot seize property unless they obtain a judgment.