In finance, unsecured debt refers to any kind of debt or general obligation this is not collateralised by a lien on specific assets of the borrower in the case of a bankruptcy or liquidation or failure to meet the terms for repayment.
In the case of the bankruptcy on the borrower, the unsecured creditors will have a general claim about the assets in the borrower after the specific pledged assets are already assigned to the secured creditors, although the unsecured creditors will most likely realize a smaller proportion with their claims compared to secured creditors.
In a few legal systems, unsecured creditors who are also indebted on the insolvent debtor can afford (and in some jurisdictions, required) to set-off the bank notes, which actually puts the unsecured creditor that has a matured liability towards the debtor in a very pre-preferential position. [edit] Examples
payday loan Also called signature loans or signature loans. These loans tend to be used by borrowers for small purchases for instance computers, small remodels, vacations or unexpected expenses. An unsecured loan means the bank relies on your promise to pay for it back. They're going for a bigger risk than with a secured loan, so rates of interest for short term loans tend to be higher. You normally have set payments over an agreed period and penalties may apply if you need to repay the loan early. Unsecured loans are often higher priced and less flexible than secured loans, but suitable if you prefer a short-term loan (one to five years).[2] In the UK there are hundreds of different unsecured loans to choose from, so comparison tables are getting to be a popular way of finding out about various options available. In 2006, in line with the Bank of England, 22% of UK households had some credit card debt with a further 21% having both secured and consumer debt.[3]