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Simple English definitions for legal terms
Unsecured debt
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A quick definition of Unsecured debt:
Unsecured debt is a type of debt that doesn't have any property or assets attached to it as collateral. This means that if the borrower can't pay back the debt, the creditor can't take any property or assets to recover their money. Examples of unsecured debt include credit card debt and medical bills. Because there is no collateral, unsecured debt is often more expensive than secured debt, with higher interest rates.
A more thorough explanation:
Unsecured debt
Unsecured debt is a type of debt that does not require any collateral to be pledged to the creditor. This means that if the borrower is unable to make payments, the creditor cannot take any property as compensation. Examples of unsecured debt include credit card debt, medical bills, and personal loans.
- Credit card debt
- Medical bills
- Personal loans
These examples illustrate unsecured debt because they are all types of debt that do not require any collateral. If a borrower is unable to make payments on their credit card debt, for example, the credit card company cannot take any property as compensation. This makes unsecured debt riskier for creditors, which is why it often carries higher interest rates than secured debt.