Key Characteristics

• No Collateral Required: You don't need to pledge an asset like a house or car to secure the loan.
• Credit-Based Approval: Lenders assess your credit score, income, and overall financial reliability to determine if they will provide the funds.
• Higher Interest Rates: To compensate for the increased risk of default, lenders often charge higher interest rates on unsecured loans.
• Stricter Eligibility: A strong credit history and stable income are usually necessary for approval, as the lender has no assets to claim if you fail to repay.
• Legal Action for Default: If you default, the lender cannot seize your assets but may take legal action to collect the debt.