Unsecured Debt
Debt not backed by collateral. Credit cards, personal loans, and medical bills are typically unsecured. If you default, the lender cannot directly seize your property (though they can sue and obtain a judgment). Unsecured debt generally has higher interest rates than secured debt.
Related guides
- Full credit & FICO® glossary
Browse all defined terms by category.
- Secured Debt
Debt backed by collateral — an asset the lender can take if you default. Mortgages (collateral: home) and auto loans (collateral: vehicle) are secured debts. Because the lender has recourse to the collateral, secured loans typically have lower interest rates than unsecured debt.
- Personal Loan
An unsecured installment loan used for various purposes (debt consolidation, home improvement, emergencies). Approved based on your creditworthiness with no collateral required. Interest rates depend heavily on your credit score.
Frequently Asked Questions About Unsecured Debt
What does Unsecured Debt mean?
Debt not backed by collateral. Credit cards, personal loans, and medical bills are typically unsecured. If you default, the lender cannot directly seize your property (though they can sue and obtain a judgment). Unsecured debt generally has higher interest rates than secured debt.
Is Unsecured Debt important for my FICO® score?
Understanding Unsecured Debt helps you manage your credit profile more effectively, which in turn supports a stronger FICO® score.