Unsecured Debts

Unsecured debts are borrowings that are not backed by collateral, meaning there's no specific asset, like a house or car, pledged to guarantee repayment. If the borrower defaults, the lender cannot seize any particular asset but can pursue legal actions to recover the owed amount. Common examples include credit card debt, medical bills, and personal loans. Because these debts carry higher risk for lenders, they often have higher interest rates than secured debts. Managing unsecured debts responsibly is important, as failure to pay can impact credit scores and lead to legal consequences.