Unsecured debt is money that is borrowed but not secured against anything, whereas secured debt is secured against something of value. In most cases the collateral for a secured debt is usually the borrower’s house, so in the case of a default the lending institution can sell the house to recover the losses.

There are usually two factors that come into play when a bank or lending institution considers giving a borrower a line of unsecured debt: credit history and current income Both of these factors not only help determine if the borrower will receive the loan or credit, but also determines how much money the institution can charge in fees and interest rates.

People with a poor credit score can except to be flat-out denied or expect to face a much higher interest rate, while people with an unblemished credit record will have a much easier time finding institutions willing to lend them money at a much lower interest rate.

If properly managed, unsecured debt can be a great solution for borrowers who need a large sum of money they otherwise would be unable to obtain, but would be able to pay back over time.

[tags]unsecured debt, debt management[/tags]