Definition
A loan that isn’t backed by collateral, often carrying higher interest rates due to the increased risk for the lender.
What to consider
- Expect higher interest rates compared to secured loans.
- Only borrow what you can afford to repay without strain.
- Compare offers to ensure you’re getting the best possible terms.
Real world scenarios
- A credit card is one example of an unsecured loan, relying on the borrower’s creditworthiness rather than any collateral.
- Rita’s personal loan from a bank is unsecured, so her approval hinges on factors like a stable income and strong credit history.
- Unsecured debt often carries higher interest rates, prompting Ethan to ensure monthly payments stay consistent to avoid costly balances.
Related terms
Related Playbooks
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