Definition of 'Unsecured Debt'
A loan not backed by an underlying asset. Unsecured debt includes credit card debt, medical bills, utility bills and any other type of loan or credit that was extended without a collateral requirement. It presents a high risk for lenders since they may have to sue to get the money they’re owed if the borrower doesn’t repay the full amount owed.
As a result of this high risk, unsecured debt tends to come with a high interest rate. Unsecured debt can be wiped out by sequestration / bankruptcy.