Unsecured debt refers to debt created without any collateral promised to the creditor. In many loans, like mortgages and car loans, the creditor has a right to take the property if payments are not made. Unsecured debt like credit cards or medical bills do not have any connection to property, and the creditors risk losing all their returns if the debtor becomes insolvent. Because of this, unsecured debt is very expensive, carrying often more than double the interest rates of secured debt.
[Last updated in August of 2021 by the Wex Definitions Team]
