uncollateralized loan

Definition

A specific type of loan that uses your credit score and credit history as a security in the place of collateral. To obtain an uncollateralized loan you need to possess a high credit score and known to be trustworthy since the bank or credit union will use your signature as a promise to repay the loan. Uncollateralized loans are considered risky by the lenders so fees and interest rates associated with the loan are usuallyhigher than with a secured loan. It is typically easier to get an uncollateralized loan from an institution with which you already have a long history.

Also known as an unsecured loan

Use this term in a sentence

Since I did not have enough equity in my home to be approved for a home equity loan, I decided that an uncollateralized loan would be my next best option given that I have a high credit score.

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