Unsecured loan: Difference between revisions
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<onlyinclude>An '''unsecured loan''' is a loan that depends entirely on the credit rating of the debtor who has not posted [[collateral]].</onlyinclude> Unsecured loans can be [[term loan]]s or [[revolving loan]]s.<ref>J.Black, N. Hashimzade, and G. Myles. (2009) "Unsecured Loan." [Online], Available: http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref-9780199237043-e-3263?rskey=ht6uyj&result=3, 2009 [Aug 20, 2016]</ref> Because the loan is not backed by collateral posted by the debtor, the debtor will pay a higher interest rate which represents the risky nature of the loan.<ref>R. A. Brealey et al. ''Fundamentals of Corporate Finance''. Toronto: McGraw-Hill Ryerson, 2012, pp. 656.</ref> | <onlyinclude>An '''unsecured loan''' is a loan that depends entirely on the credit rating of the debtor who has not posted [[collateral]].</onlyinclude> Unsecured loans can be [[term loan]]s or [[revolving loan]]s.<ref>J.Black, N. Hashimzade, and G. Myles. (2009) "Unsecured Loan." [Online], Available: http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref-9780199237043-e-3263?rskey=ht6uyj&result=3, 2009 [Aug 20, 2016]</ref> Because the loan is not backed by collateral posted by the debtor, the debtor will pay a higher interest rate which represents the risky nature of the loan.<ref>R. A. Brealey et al. ''Fundamentals of Corporate Finance''. Toronto: McGraw-Hill Ryerson, 2012, pp. 656.</ref> | ||
==Unsecured Default== | ==Unsecured Default== | ||
Unlike a [[secured loan]] where the lender can seize the posted collateral to recover their money if the debt is not repaid, an unsecured lender cannot. An unsecured lender can hire a collection agency to collect the payment or in certain cases, the lender can take the debtor to court to recover the money owed.<ref name= | Unlike a [[secured loan]] where the lender can seize the posted collateral to recover their money if the debt is not repaid, an unsecured lender cannot. An unsecured lender can hire a collection agency to collect the payment or in certain cases, the lender can take the debtor to court to recover the money owed.<ref name=Ox_econ>"A Dictionary of Economics" published Oxford University Press, 2013. Edited by John Black, Nigar Hashimzade, and Gareth Myles Online version accessed [August 17th, 2017].</ref> | ||
Collection agencies are very common with credit card debt. | |||
==Common Unsecured Loans | ==Common Unsecured Loans== | ||
*Student loans | *Student loans | ||
*Credit cards | *Credit cards |
Revision as of 20:13, 17 August 2017
An unsecured loan is a loan that depends entirely on the credit rating of the debtor who has not posted collateral. Unsecured loans can be term loans or revolving loans.[1] Because the loan is not backed by collateral posted by the debtor, the debtor will pay a higher interest rate which represents the risky nature of the loan.[2]
Unsecured Default
Unlike a secured loan where the lender can seize the posted collateral to recover their money if the debt is not repaid, an unsecured lender cannot. An unsecured lender can hire a collection agency to collect the payment or in certain cases, the lender can take the debtor to court to recover the money owed.[3] Collection agencies are very common with credit card debt.
Common Unsecured Loans
- Student loans
- Credit cards
- Personal loans (such as those from a cash advance or payday lender)
See Also
References
- ↑ J.Black, N. Hashimzade, and G. Myles. (2009) "Unsecured Loan." [Online], Available: http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref-9780199237043-e-3263?rskey=ht6uyj&result=3, 2009 [Aug 20, 2016]
- ↑ R. A. Brealey et al. Fundamentals of Corporate Finance. Toronto: McGraw-Hill Ryerson, 2012, pp. 656.
- ↑ "A Dictionary of Economics" published Oxford University Press, 2013. Edited by John Black, Nigar Hashimzade, and Gareth Myles Online version accessed [August 17th, 2017].