What is an Unsecured Loan?

An Unsecured Loan is a personal loan that does not require any form of Collateral, unlike a mortgage or Secured Loan.

A personal loan is not secured against a house or other collateral, which means that the bank cannot repossess a house in the event of Default. As there is no Security to sell if a borrower fails to make payments, lenders are likely to be more strict in their lending criteria, and possibly offer a higher APR to cover any level of risk to them.

From the borrower’s point of view, an unsecured personal loan is more attractive than a secured loan, as their home cannot be claimed by the bank. However, as they can carry a higher interest rate than secured loans, they may cost the borrower more in the long run.

Q: Can unsecured loans be written off?

A: If you fail to make payments, a the courts can write off a debt if they decide conclude there is no way to reclaim the money owed. However, this will only be used as a last resort, and there are many forms of Remedy After Judgment that will be recommended first.