What Qualifies as Unsecured Debt?

Unsecured debt is debt that is not backed by any collateral such as a house, vehicle, furniture or other valuables. Instead, lenders give out unsecured credit on the strength of your credit history and income. For this reason, unsecured credit is often harder to obtain than secured credit, and the terms for unsecured loans are often shorter.

Personal Loans

A personal loan in an unsecured extension of credit to an individual, usually in a lump-sum payment. Personal loans are also known as signature loans. To offset the increased risk of not having collateral, lenders place higher interest rates on personal loans.

Credit Cards

Credit cards make a fixed amount of funds available for you to make purchases. Credit cards are unsecured debts because although you primarily use the cards to purchase items, the card issuer has no legal right to seize the items you purchase if you do not pay the bill.

Medical Debt

Medical debts such as hospital bills, doctors' expenses and co-pays are unsecured debts. This also includes debts from medical financing companies such as lines of credit, e.g., CareCredit.

Bills

U.S. law considers past due rent, utility, cable, Internet and phone bills unsecured debts. Bills for private school or college tuition are also unsecured debts. Unsecured debts also include bills for services such as lawn care, pest control and pet care.

Student Loans

Federal and private students loans are both considered unsecured. However, in the case of federally-guaranteed loans, the government will seize your tax returns to repay the debt. Although you can include most unsecured debt in bankruptcy, you cannot discharge student loan debt unless you have a permanent condition or circumstance that does not allow you to pursue gainful employment.

Lines of Credit

A line of credit is an unsecured debt that is similar to a credit card because you have a pool of available funds instead of the lump-sum payment of a loan. Unlike a credit card, a line of credit is primarily used to draw cash and write checks. The only secured lines of credit are home equity lines of credit (HELOCs). This is because HELOCs are tied to the equity in your house and the lender has a claim to that portion of the home's value.