A debt that does not require a piece of property as collateral, unsecured debt` typically comes with higher interest rates than secured debt. These higher interest rates often reflect the risk of not being able to repay the loan. Some types of unsecured debt include student loans, personal loans and traditional credit cards. It is also possible to have unsecured debt for business purposes, like equipment leasing and working capital loans.

In most cases, if you fail to pay back an unsecured debt, it does not result in your property being taken over by the lender. However, missed unsecured debt payments can still affect your credit score and may cause negative marks to remain on your credit report for years.

Unsecured Debt

If you have an unsecured debt, it’s important to make your payments on time, as these debts can add up quickly. The good news is that you can manage unsecured debt effectively to reduce its impact on your finances.

In addition to making timely payments on your unsecured debt, you can focus on strategies that can help you improve your financial health, such as reducing spending and increasing savings. If you’re struggling to manage unsecured debt, consider a debt management program, which can help you work on your budget and payment plan with a counselor.