An unsecured loan refers to a loan which is based solely on the borrower’s ability to repay the loan. This differs from secured loans which require the borrower to use an asset as collateral for the loan. This means the lender will be able to use this collateral to recover funds if the borrower defaults on the loan. This gives the lender a great deal of security and as a result the lender is often able to offer lower interest rates on the loan.

A payday loan is one example of an unsecured loan. This type of loan is based solely on the borrower’s ability to repay the loan as opposed to his assets. The lender bases the loan amount on the applicant’s net monthly income and sets the maximum loan amount to ensure the borrower is able to fully repay the loan on his next payday.

About LifeTips

Now one of the top on-line publishers in the world, LifeTips offers tips to millions of monthly visitors. Our mission mission is to make your life smarter, better, faster and wiser. Expert writers earn dough for what they know. And exclusive sponsors in each niche topic help us make-it-all happen.

Exclusive Sponsor

Ask a Question

Not finding the advice and tips you need on this Cash Advance Tip Site? Request a Tip Now!

Guru Spotlight

Ray Lokar

Ever wonder how you could make your life better and more fun? So have tens of millions of fans who have turned to LifeTips for answers over the past decade. We keep the tips, advice, books, podcasts and writing services flowing, so you can keep your life and business growing in the right direction. Upward!