Unsecured Loan

An unsecured loan is a loan that, unlike a secured loan, isn’t backed by any collateral and relies only on the borrower’s creditworthiness. If the borrower defaults, there is no asset to seize and sell, and the only way to try to recoup (part of) the investment is through a lawsuit. Some P2P platforms sell defaulted unsecured loans to specialised debt recovery companies for a fraction of the outstanding value to recover a share of the capital in a relatively short time (legal proceedings may take years).