Unsecured loans, also known as signature loans, are loans which require no collateral to be provided by the borrower. The borrowers signature is all that is required by the lender to complete the transaction. Typically, one would need a high credit score in order to qualify for an unsecured loan. The lender assumes greater risk, when holding no collateral, thus the need for greater credit worthiness of the borrower.
Unsecured loans may be anything from a personal loan from a friend, with a written IOU, to a loan from bank or other lending institution. A credit card transaction is also a common type of unsecured loan. Interest rates vary regarding unsecured loans based upon the quality of one’s credit.
