Unsecured Loan Definition

An unsecured loan is a loan obtained from a creditor simply because of the debtor’s good credit rating. As there is no asset pledged as collateral, the loan is said to be unsecured. If the debt is not repaid in accordance with the terms of the loan, the creditor may attempt various debt collection remedies but is not generally allowed to seize any tangible assets of the debtor. As unsecured loans are considered to be more at risk than secured loans, they are typically offered only at high annual percentage rates.