What is an Unsecured Loan?
Loans can be divided into two types: Secured and Unsecured
An unsecured loan does not have any collateral attached to it. Because of the lack of collateral, interest rates for unsecured loans are higher.
Unsecured loans are further divided into two categories in: Term and Revolving
- Examples of the term unsecured loans include education loans, personal loans and payday loans.
- Examples of revolving unsecured loans are overdraft protection, credit cards, charge cards, and personal lines of credit.
Unsecured loans are a great alternative to secured loans for people with no collateral to pledge. Although the applicant may not be required to pledge collateral for an unsecured loan the borrower is legally bound to repay the loan as per the terms and conditions agreed upon.
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