What is Unsecured Debt?

Learn what unsecured debt is and how it differs from other types of debt.

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People get into debt for a number of reasons. This type of debt may be secured debt or unsecured debt. Understanding these differences is important for organizing bills into high priority and low priority. Unsecured debt, specifically, includes both high-priority and low-priority expenses. Learn more about the types of unsecured debt below. 


Unsecured debt refers to debt that isn’t tied to any collateral such as a home or a car. Generally, collateral serves as the lender’s guarantee that the borrower will pay the debt. If the borrower fails to do so, the lender can retrieve the collateral as a way of recouping from the loss caused by any unsettled debt. However, with unsecured debt, no item or asset is pledged by the borrower.



Student loans are offered to students so they can have the resources needed to finance their studies. When it comes to student loans, repayment typically starts after a student graduates.


Medical debt can stem from an unexpected accident or illness. They can accumulate quickly. In fact, more than 40% of Americans have debt troubles related to medical bills.


One of the most prevalent types of unsecured debt is credit card debt. Credit card debt allows a borrower to make purchases that they can pay at a later time. But this type of debt also carries one of the highest interest rates in the debt industry. And with more than $1 trillion in total credit card debt, Americans have hit a record-high when it comes to credit card bills.


Personal loans are also known as signature loans, A borrower may apply for an unsecured personal loan for many different reasons – to take a vacation, finance home repairs, or start a business. This type of loan can be funded by a bank, online lending company, or credit union.


  • Apartment leases
  • Cell phone bills 
  • Utility bills

With no asset risk and shorter repayment terms, unsecured debts can be beneficial for borrowers who want to make quick purchases. However, failure to pay unsecured debts can come with serious consequences. If you struggle to pay off your unsecured debt, consider debt consolidation or debt settlement to pay off debt faster.

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