What is unsecured debt consolidation loan?
An unsecured debt consolidation loan is basically a loan that is not backed by a security or a collateral and is used to pay off a number of debts. Here’s a more simple explanation to the concept of unsecured debt consolidation loans. In a more technical sense, unsecured loan and debt consolidation loans are two characteristics of loans. An unsecured loan is a loan which is not secured by a collateral, unlike the secured loans. For most of the loans, borrowers have to pledge some or the other asset with the lenders in order to get the loan sanctioned. The asset that is pledged by the lender is known as the collateral or security. If the loan is defaulted by the borrower, then the lender has a right to liquidize and sell off the collateral in order to recover the loan amount that is lost. However, in case of unsecured loans there is no security that is pledged by the borrower. Hence, an unsecured loan simply becomes a debt for the borrower. The second feature of the loan that is equally
