For unsecured loans, borrower does not need to provide any assets to the lender as security for the loan. Interest rates for such loans tend to be higher.
In the event of the bankruptcy of the borrower, the unsecured creditors will have a general claim on the assets of the borrower after the specific pledged assets have been assigned to the secured creditors. The unsecured creditors will usually realize a smaller proportion of their claims than the secured creditors.
Most unsecured loans charge fixed interest rates whether they are term or revolving loans, unless promotional interest rates apply. In the case of secured loans, a consumer will have a choice of fixed or floating interest rate options.
The biggest advantage of unsecured loans is the fact that it is possible for anyone to borrow money whether you are a tenant or a homeowner, you can borrow money without putting up any collateral.
For those who own a home but would rather not risk it, an unsecured loan is the solution since it doesn’t directly pose a risk to it or your other assets.
Unsecured loans are usually in small amounts, loan completion is much quicker than on secured loans, in some cases you can receive the money on the same day of being approved.