Unsecured LoansUnsecured loans are loans that are offered without any security. They are not guaranteed with any asset . It involves lots of risks for the lender and there is no risk of repossession for the borrower. Since it poses risks, the lender charges higher rates of interest. So it is expensive than the secured loans. Examples for unsecured loans are credit cards debt, personal loans, bank overdraft etc
Credit card is rampantly used to get unsecured loans. Credit card loans should be reimbursed within a month. The consumers should pay interests and other service charges for the credit card companies. Similarly when a customer withdraws more money than what is available in his account (bank overdrafts), it becomes unsecured loan. Many financial institutions offer quick cash for individuals to meet an emergency expense or to make other major purchases. Excessive unsecured loan will have negative impact on one's credit score. So he or she will be charged higher interest rates in secured loans as well.
More Glossary Terms Explained here
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