What Is an Unsecured Loan?
An unsecured loan is a loan that is not backed by collateral. The lender relies on the borrower's credit history, income, and promise to repay. Credit cards, most personal loans, and many student loans are unsecured. Because the lender takes more risk, interest rates are often higher than for secured loans.
What Happens If It Is Not Repaid
There is no specific asset to repossess, but missed payments can lead to late fees, damage to the credit report, collection activity, and in some cases legal action.
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🔗 Related Terms
More Loans & Credit Terms
- Amortization
- APR (Annual Percentage Rate)
- Auto Loan
- Balance Transfer
- Balloon Payment
- Buy Now, Pay Later (BNPL)
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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.