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: 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. Any form of insolvency will significantly reduce your ability to take out credit for at least six years.