Unsecured debts do not require collateral. But missed unsecured debt payments or defaults can definitely have consequences. Examples of unsecured debt are student loans, personal loans and traditional credit cards.
Unsecured debts have no backing provided by a collateral. There is no requirement of any security – just as the name implies. If the borrower defaults on repaying this type of loan, the lender must initiate a lawsuit to try to collect what it is owed. Lenders issue unsecured loans solely based on the borrower’s creditworthiness on reviewing their credit score and other details and their promise to repay.
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