Unsecured loans are loans that are not backed by collateral. This means that the lender does not have any claim on your assets if you fail to repay the loan. Instead, approval is typically based on your creditworthiness and financial history. Common examples of unsecured loans include personal loans, credit cards, and student loans.
Since there’s no collateral involved, these loans often come with higher interest rates compared to secured loans. The lender takes on more risk, so they may also have stricter qualification criteria. If you default on an unsecured loan, the lender can take legal action to recover the owed amount, but they cannot seize specific assets.