Unsecured Loan

An unsecured loan is a type of loan that does not require collateral, relying solely on the borrower’s creditworthiness and promise to repay. Common examples include personal loans, credit cards, and student loans. Because these loans pose a higher risk to lenders, they typically come with higher interest rates compared to secured loans. 

Evaluating the borrower’s credit history and income is crucial for approving unsecured loans, as there is no asset to recover if the borrower defaults.