Glossary
Unsecured
A loan that requires no collateral — approval rests on your credit profile and income.
An unsecured loan is backed by nothing but your promise to repay, so the lender prices in the added risk with a higher rate than a comparable secured loan. Personal loans, most credit cards, and student loans are unsecured. The upside is that a default cannot cost you a specific asset like a house or car — though it still damages your credit and can end in collections or a lawsuit.
Related terms
- Soft credit check A credit check that does not affect your score — used for pre-qualification, background checks, and checking your own report.
- DTI Debt-to-income ratio: monthly debt payments divided by gross monthly income. Most lenders draw the line at 36–43%.
- APR Annual percentage rate — the interest rate plus mandatory fees, expressed as one yearly cost. The only honest way to compare two loan offers.
- Escrow A holding account your servicer uses to collect and pay property taxes and insurance alongside your mortgage payment.
- Prepayment penalty A fee some lenders charge for paying a loan off early. Rare on consumer loans, common in commercial lending — always check the note.
- Equity The slice of your home you actually own — its market value minus what you still owe on it.