# Unsecured Loan

Nov 14, 2024

< 1min read

An unsecured loan is a type of loan that does not require [collateral](/content/glossary/collateral/index.html), relying solely on the borrower’s creditworthiness and promise to repay. Common examples include personal loans, credit cards, and student loans. Because these loans pose a higher risk to lenders, they typically come with higher interest rates compared to [secured loans](/content/glossary/secured-loan/index.html).

Evaluating the borrower’s credit history and income is crucial for approving unsecured loans, as there is no [asset](/content/glossary/asset/index.html) to recover if the [borrower defaults](/content/glossary/borrower-default/index.html).