<u>An unsecured loan is a category of the loan in which the borrower receives a loan based solely on his or her creditworthiness and does not need to must pledge some sort of asset as collateral.</u>
Further Explanation:
Unsecured loan:
An unsecured loan refers to the loan that is granted based on the applicant’s creditworthiness. The applicant does not require to transfer any asset to back the loan. The bank checks the credit history of the applicant and issues the loan only based on the credibility to repay the loan. As the loan is granted solely based on the creditworthiness, therefore, it is known as the unsecured loan.
The unsecured loan is considered risky for the banker or the lender because it is not secured by any asset. The banker or lender would not be able to take the possession of any asset at the time of default in the payment of the loan.
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An unsecured loan is a category of the loan in which the borrower receives a loan based solely on his or her creditworthiness and does not need to must pledge some sort of asset as collateral.
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Answer details:
Grade: Senior School
Chapter: Loans
Subject: Accounting
Keywords: category, loan, which, borrower, receives, loan, solely, his, her, creditworthiness, does, must, pledge, some, sort, asset, collateral.
