An unsecured loan is only backed by the creditworthiness of the borrower and not by any collateral such as property or other assets.
Unsecured loans are riskier than secured loans for lenders, so they require a higher credit score to be approved.
Credit cards, student loans and personal loans are examples of unsecured loans.
If the borrower defaults on an unsecured loan, the lender may instruct a collection agency to collect the debt or take the borrower to court.
Lenders can decide whether or not to approve an unsecured loan based on the creditworthiness of the borrower, but laws protect borrowers from discriminatory lending practices.