What Is An Unsecured Loan? Types, Examples & How They Work

Types of Unsecured Loans

Personal Loans

The most common type of unsecured loan. You receive a lump sum and repay it in fixed monthly installments over 24 to 84 months. Can be used for debt consolidation, home improvements, medical bills, and major purchases.

Credit Cards

A form of revolving unsecured credit. You can borrow repeatedly up to your credit limit. However, interest rates are typically much higher than personal loan rates.

Student Loans

Most federal and many private student loans are unsecured. Designed for education expenses with lower rates and flexible repayment.

Lines of Credit

Similar to a credit card but typically with lower rates. You have a set limit and only pay interest on what you borrow.

Unsecured vs. Secured Loans

Secured loans require collateral (your home, car, etc.) which the lender can seize if you default. Unsecured loans have no collateral — higher rates but no risk to your assets, faster approval, and simpler applications.

Frequently Asked Questions

What credit score do I need for an unsecured personal loan?

Most lenders require 580-660. Upstart accepts scores as low as 300 using AI evaluation.

What happens if I default on an unsecured loan?

The lender cannot seize your assets, but they can send your account to collections, damage your credit score, and potentially sue for the balance.

Can I get an unsecured loan with bad credit?

Yes, but at higher rates (20-36% APR). Upgrade accepts 580+, Upstart uses AI beyond credit scores.