Because an unsecured loan is never guaranteed by any type of property, these types of loans are a larger risk for lenders and typically have a much higher interest rate than secured loans. Although the interest rate may be higher, there may still be a lower interest rate than credit cards. Unlike mortgage loans, the interest on an unsecured loan cannot be tax deductible.
An unsecured loan is a good option for individuals who may not have enough equity in their house to be approved for a home equity loan. An unsecured loan will usually have a fixed interest rate and be owed at the end of a specific term, or it can be a revolving line of credit with a variable interest rate.