Unsecured debt is a category of debt that does not require a pledge of assets. such as automobiles, stocks, house, etc. The asset or property with which you pledge to secure the loan is known as collateral. An unsecured loan is considered unsecured debt and is typically granted based on the amount of the loan, the borrower’s income, as well as credit history. A co-signer may be required, which means if you default on the loan the co-signer would be responsible for making the loan payments. Some unsecured debt lenders require automatic monthly payment deductions from your bank account as a condition of loan approval. It is important to carefully review the terms of the unsecured loan as it may come with a higher interest rate, late payment fees, as well as shorter payback.

Some examples of unsecured debt include. 

• A credit card is a payment card that enables the cardholder to pay a merchant for goods and services based on the cardholder’s approved debt level.

• A medical bill includes debts owed to a hospital, private physician, health care clinic, treatment center, etc.

• A payday loan is a relatively small amount of money loaned at a high rate of interest with an agreement that it will be repaid when the borrower receives their next paycheck.

• A cash advance is a way of obtaining money immediately through a pledge to your credit card’s line of credit.

What happens if you do not pay an unsecured loan?

If you do not make your loan payment on the due date you may be subject to late payment fees.  In the event you stop making payments for several months, you may be considered in default by the lender. Default is the failure to meet the legal obligations of a loan.